Markets to make a positive start, extending last session gains

The Indian markets before going for a long weekend posted decent gains on hopes of good economic growth. Today, the start is likely to be in green and the markets will be extending the gains on jubilant regional cues. Traders will be getting some support with report that growth in India’s services industry accelerated to its fastest pace in more than 3-1/2 years in August, driven by a surge in domestic and foreign demand. The Nikkei/Markit Services Purchasing Managers' Index jumped to 54.7 in August, its highest since January 2013, from 51.9 in July. Also there are reports that Prime Minister's Office (PMO) will soon clear projects worth Rs 20 lakh crore, stating that the Project Monitoring Group (PMG) has already cleared 276 projects worth 10 lakh crore which were stalled due to various reasons including roads, environment, coal and power among others. However, there will be some cautiousness too, with former RBI governor Raghuran Rajan’s warning that Low interest rates globally could distort markets and it would be difficult to abandon. There will be some buzz in the steel stocks, on report that the government is unlikely to further extend the minimum import price (MIP) on certain steel products beyond October 4 as these items could be covered under anti-dumping duty.

The US markets remained closed in last session unable to give any cues to the other markets. The Asian markets have however made a strong start and some of the indices in the region are trading near one-year high and the dollar maintained losses from the last session as prospects for a US interest-rate increase this month remained subdued.

Back home, after slipping into the negative territory on Thursday, Indian markets made a strong comeback on Friday, with the benchmark indices hitting fresh 52-week highs and raising weekly gains to over two and half percent.  Sentiments remained optimistic right from the start of trade as Odisha became the 16th state to ratify the constitutional amendment bill passed by Parliament to introduce the goods and services tax (GST), helping cross the important threshold of more than half the number of states needed for the proposed law to be sent for presidential assent. Also, investors got some peace of mind from chief economic advisor Arvind Subramanian’s statement that India has the potential to sustain 8 to 10 percent GDP growth rate during the next two to three years, despite April-June GDP growth coming in below expectations at 7.1 percent. Allaying fears that the roll out of the GST will not fuel inflationary pressure, Subramanian said the key objective of the tax reform was to shield the poorest sections from inflation.  Some support also came with International Monetary Fund’s (IMF’s) report praising the country by saying that India has recently taken important steps towards a national goods and services tax which, when fully implemented, promises to boost tax buoyancy and growth, including by enhancing the efficiency of the internal goods and services market. However, the sanguinity in local markets was under check by IMD’s report saying that the country’s cumulative rainfall during this year's monsoon so far (till 31 August 2016) was 3% below the long period average (LPA). Meanwhile, Sugar stocks came under pressure after the government imposed stock limits on sugar mills during the festival season till October-end. However, many infrastructure companies continued their uptrend for the third straight sessions after the Cabinet approved an array of measures to help quickly resolve disputes, pump in liquidity and deal with stressed assets. Good buying was also observed in selected auto stocks amid robust auto sales in August. On the global front, Asian market ended mixed on Friday, while European markets held steady in early trade. Back home, the local benchmarks got off to a positive opening, in tandem with the cautiously optimistic sentiments prevailing in Asian markets. Investors around the region remained cautious ahead of US non-farm payrolls report which could give clues on whether the Federal Reserve will raise interest rates as soon as this month. Finally, the BSE Sensex surged 108.63 points or 0.38% to 28532.11, while the CNX Nifty gained 35 points or 0.40% to 8,809.65. Indian markets remained closed on Monday on account of a public holiday.