Markets to get a cautious start of F&O series expiry session

The Indian equity markets markets managed a positive close in last session on the back of smart recovery in final hour of trade. Today, the start of the F&O series expiry day is likely to see a cautious start for the markets as the regional markets are trading mixed, while some volatility is expected in latter trade once traders starts settling and rolling out their final positions to the next series. Traders will get some encouragement with Commerce and Industry Minister Nirmala Sitharaman pitching for as much as 200 basis points, that is 2 per cent, interest rate cut by RBI to help the cash-starved MSME sector. Markets will get some support with the Union cabinet approving a revised India-Cyprus tax treaty that seeks to plug loopholes used by investors to avoid paying taxes in India. The country will get the right to tax capital gains from sale of shares on investments made by Cyprus-based companies after 1 April 2017. Traders will also get some relief with Delhi Assembly ratifying Goods and Service Tax (GST) Constitution Amendment Bill, becoming the third non-BJP-ruled state and overall the eighth to clear the proposed tax regime, billed as single biggest tax reform in decades. The power sector will keep buzzing after the Union Railway Ministry revised freight rates for coal, a commodity from which it earns at least 45% of its revenue. This will raise power generation costs for several plants. There will be some action in stocks related to tobacco products after Nirmala Sitharaman said that FDI in tobacco sector cannot be encouraged because of public health reasons and also it would be against India’s commitment to the WHO.

The US markets ended the lacklustre session of trade in red terrain on Wednesday on report from the National Association of Realtors showing a substantial decrease in existing home sales in the month of July. The Asian markets were exhibiting mixed trend as traders remained on sidelines ahead of a key meeting of the U.S. Federal Reserve at Jackson Hole, this week.

Back home, Wednesday’s session was characterized by extreme volatility as the frontline indices went through a rollercoaster ride amid lack of direction ahead of August F&O expiry and signals on key policy rates from US Federal Reserve Chair Janet Yellen at a meeting scheduled this week. However, investors’ morale remained upbeat on account of study progress of Goods and Services Tax (GST), which will be implemented from April 1, 2017. Some support also came with rating agency Ind-Ra revising India's economic growth forecast to 7.8 percent for the ongoing fiscal on better monsoon. It has said the positive impact of monsoon on agriculture will support the overall GDP growth with its backward and forward linkages.  However, markets participants remained cautious after FIIs had turned net sellers in the last two days in both equities and derivatives for the first time this month. Meanwhile, mild selling witnessed in selected sugar counters on the report that sugar production in Maharashtra, which contributes a third of the country's sugar production, is likely to drop to 5.5 MT, the lowest in the past five years, due to drought and crop diversification across Marathwada and western parts of the state. On the global front, Asian markets ended mostly in red on Wednesday as strong US housing data overnight increased the chances of an interest rate increase in coming months, prompting some investors to take profits. Back home, the benchmark got off to an optimistic opening, shrugging the somber sentiments prevailing in Asian markets ahead of Federal Reserve chair Janet Yellen's speech later in the week. Thereafter, the broader markets failed to show any kind of fervor as they oscillated around the neutral line for most part of morning trades and drifted deeper into the red terrain in noon session. However, late short covering in blue-chip stocks and supportive leads from European markets ensured that local bourses go home with some gains. Finally, the BSE Sensex gained 69.73 points or 0.25% to 28059.94, while the CNX Nifty rose by 17.70 points or 0.21% to 8,650.30.