Markets to get a positive start on supportive global cues

The Indian markets truly depicted the choppiness and ended in red in the last session, as worries about provisioning towards large NPA kept investors on the sidelines. Today, the start of the F&O series expiry session is likely to be in green on positive global cues. However, the expiry day is very much likely to bring in volatility later in the day. Traders will be getting some support with India Meteorological Department’s (IMD) statement that 79 percent of the country has received normal-to-above-normal rainfall. It is seeing a steady progress in rainfall in central India and expects average July rainfall at 96 percent. Moreover, it maintains monsoon projection at 98 percent as was predicted in June. Meanwhile, Finance Minister Arun Jaitley said that the Seventh Pay Commission’s recommendations have been cleared with 34 modifications. The revised rates will be effective from July 1, 2017. The increased allowance will impose an additional annual burden of Rs 30,748 crore on the exchequer. There will be some buzz in the banking stocks with former RBI Governor Y V Reddy stating that India needs to develop its own path to attain capital adequacy for public sector banks (PSBs) as required by the Basel III global norms.

The US markets ended in green terrain on Wednesday on bargain hunting, as traders picked up stocks at relatively reduced levels following yesterday’s weakness. Asian markets have made a positive start with most of the markets were trading with a gain of over half a percent, taking cues from a stronger finish in US markets, with traders expected to digest comments from top central bankers overnight.

Back home, the penultimate day of June series futures and options contract expiry turned out to be a disappointing session for the Indian equity indices, as they went on to extend the declining streak for the third successive session and settled below the psychological 9,500 (Nifty) and 30,900 (Sensex) levels. The session largely remained characterized by choppiness, as the aimless indices moved only sideways in a tight band, lacking any significant upside triggers. Trading Sentiments were undermined after global credit rating agency Fitch maintained its negative outlook on Indian banks because of erosion of the sector's core capitalization, even as they enter the final phase of Basel III migration. This is based on its assessment that the sector's core capitalization, which has been eroded in the last few years, will remain challenged unless it is boosted by adequate capital support from the authorities or equity raising from capital markets. Further, negative opening of European markets and ongoing weakness in other Asian markets, after Wall Street was knocked hard in the wake of a delay to a US healthcare reform vote, also spoiled investors' sentiments. Some weakness also came with Finance Minister Arun Jaitley's statement that people may have to face some difficulty initially during the Goods and Services Tax (GST) is rolled out, but in the long run the new indirect tax regime would help cut tax evasion and check price rise. He also said that the GST Council will look at bringing real estate within the GST net by next year and revisit taxing of petroleum products under the new regime in 1-2 years. However, the broader markets showed some resilience and settled on a positive note, outperforming their larger peers by quite a margin. Market participants got some confidence with Union Power Minister Piyush Goyal’s statement that the GST will reduce the work of businesses by reducing the number of taxes from 11 to one. He added that the Goods and Services Tax Network (GSTN) will make filing returns and make book keeping very easy. Finally, the BSE Sensex declined 123.93 points or 0.40% to 30834.32, while the CNX Nifty was down by 20.15 points or 0.21% to 9,491.25.