Markets to see some recovery on supportive regional cues

The Indian markets suffered sell-off on the very first day of the F&O series expiry and the major benchmarks deposed over half a percent with selling intensifying in bluechips. Today, the start is likely to be in green and some recovery can be seen on supportive global cues. Traders will also be getting some support with the government working under a self-imposed July 1 deadline for the goods and services tax (GST) roll-out, tabling four Bills related to the proposed comprehensive indirect tax in Parliament for passage, among other things, the legislation provides for a peak GST rate of 40% and setting up of an authority to protect consumers from profiteering by businesses. There will be some concern too, as the private forecaster Skymet has said India is likely to receive below-normal rainfall this year owing to an evolving El Niño. If the forecast turns out to be accurate, it could prove worrisome for the economy. The rupee has been on a rising streak and touched 17 months high in last session. Meanwhile, RBI’s Deputy Governor S S Mundra has said that the central bank don't target a particular range for the rupee. What it always do is to curb the undue volatility in the (forex) market.

The US markets continued their consolidation mood and the major averages spent the day bouncing back and forth across the neutral line, amid weakness overseas following the decision by Republican leaders to withdraw their bill to repeal and replace Obamacare. The Asian markets have made mostly a positive start led by the Japanese market which is up by over a percent, as investors assessed the US administration’s ability to enact reform. The dollar steadied, weighed down by the chance of slower inflation necessitating less need for quicker interest-rate increases.

Back home, Indian equity markets concluded the fresh week on a depressing note, tracking weak global cues as US President Donald Trump's failure on healthcare reform, raised questions about his ability to push through tax cuts and fiscal spending to boost the economy. The focus also remains on Brexit-related events ahead of the British government's planned triggering of Article 50 this week. On the domestic front, sentiments were undermined by Skymet Weather prediction that monsoon 2017 would be below normal with error margin of plus and minus 5%. Between June and September, which is the monsoon season in India, rainfall is forecast to be at 95% of the long period average of 887 mm. About 70% of India’s rainfall happens in this period and irrigates almost half of India’s farmland, being of particular importance for Kharif crops. There is a fifty percent chance of an El Nino developing in the second half of the monsoon season, which translates into deficit rainfall in the months of July. Although expectations about roll out of the Goods and Services Tax from July 1, 2017 appear to be limiting the market's downside, the mood is quite cautious with investors looking ahead to the reporting season that is just a few sessions away. Meanwhile, aviation stocks gained traction after the report that India has become the third largest aviation market in terms of domestic passenger traffic. India’s domestic air passenger traffic stood at 100 million in 2016 and was behind only the US (719 million) and China (436 million). Further, PSU Bank gained as Finance Minister Arun Jaitley last week said that the government, in tandem with the RBI, is working on a radical proposal to resolve the issue of bad loans in the banking system. Finally, the BSE Sensex decreased 184.25 points or 0.63% to 29,237.15, while the CNX Nifty was down by 62.80 points or 0.69% to 9,045.20.