Markets to get a strong start of the F&O expiry session

The Indian markets gradually gaining pace posted decent gains in last session on supportive global cues. Today, the start of the F&O series expiry session is likely to be in green tailing strong cues from other global markets. However, there will be some volatility too ahead of the expiry as the traders will roll out their positions to the new series. Marketmen will be eyeing the Chief Ministers' panel on digital economy submitting its interim report to the government. Meanwhile, the Central Board of Direct Taxes (CBDT) tightening screws on shell companies, has issued the much-awaited "guiding principles" for determination of a Place of Effective Management (PoEM) of a company, scotching speculation that the Budget may see its removal from the statute book. There will be some cautiousness too in the markets with India Ratings, a unit of Fitch, in its latest report stating that most Indian companies with overseas debt have not hedged enough of their foreign currency risk, making them vulnerable to any sharp movements in the rupee. There will be lots of individual stock reaction based on their earnings announcements.

The US markets coming out of their consolidation mood rallied in last session, with the S&P 500 and Nasdaq Composite posting record closing highs despite mixed U.S. economic data. Existing home sales fell 2.8 percent in December to reach an annual pace of 5.49 million units. The Asian markets have made an all green start taking cues from the US markets, as corporate results reignited investors’ optimism in economic growth, while a surge in commodities prices bolstered raw-materials companies.

Back home, Indian equity indices sustained their uptrend for the second day of F&O expiry week, as sentiment stayed positive on optimism ahead on Union Budget 2017 to be unveiled next week. The Supreme Court paved the way for presentation of the Union Budget on February 1, as it dismissed a plea seeking its postponement in view of Assembly elections in five states. Investors are hoping for a budget that delivers some incentives to support an economy, which has been hit by India's shock move to ban higher-value banknotes. Further, the government is likely to set fiscal deficit target in the range of 3.3-3.4 percent of GDP for the financial year 2017-18 in the upcoming Budget. A high-level committee the government had set up to review fiscal responsibility rules has recommended a framework to allow greater fiscal space for the government to spend more on development. Besides, positive trade in Asian markets coupled with the appreciation in rupee value against the dollar added to the optimistic sentiments. Indian rupee strengthened by 7 paise to 68.14 against the dollar on Tuesday on increased selling of the US currency by exporters and banks. Some support also came from SBI’s research report Ecowrap, which has said that the Government is likely to make sweeping recast of direct taxes in the ensuing Budget to give a boost to the economy following demonetization.  On the global front, Asian markets ended mostly higher on Tuesday as higher commodity prices on a weaker dollar helped investors shrug off renewed concerns about protectionist policies under new US President Donald Trump. Back home, finally, the BSE Sensex gained 258.24 points or 0.95% to 27375.58, while the CNX Nifty was up by 84.30 points or 1% to 8,475.80.