Markets to extend gains with a positive start

The Indian markets rallied in last session on expectations that the biggest tax reform in independent India will support higher government revenue generation, after the goods and services tax (GST) kicked in on July 1. Today, the start is likely to be in green and the markets may extend the gains, despite sluggish global cues. Also, Chief Economic Adviser to Finance Ministry Arvind Subramanian has asked to wait till fiscal end before assessing GST impact. Meanwhile, Railway Minister Suresh Prabhu has termed the Goods and Services Tax as a great unifying factor, both in societal and political spheres in the country. Markets may get some support with reports that India has told the World Bank that it has improved processes for granting construction permits sufficiently to pip the current topper, New Zealand, in the next edition of the Doing Business report. India was ranked 185 among 190 nations surveyed on the parameter of getting a construction permit in the study conducted last year. There will be some buzz in the oil stocks, as the International Energy Agency (IEA) has said that emerging and developing countries in Asia, particularly China and India will account for about 90 per cent of the net increase in road freight oil demand till 2050.

The US markets made a mixed closing in the last session following the release of a report from the Institute for Supply Management showing acceleration in the rate of growth in the US manufacturing sector, while construction spending was unchanged in May. The Asian markets have made a mixed start and some of the indices were down by about half a percent. The Japanese market too has given up most of the gains after the yen briefly spiked on a report that North Korea launched a missile.

Back home, Indian equity indices showcased a courageous performance and went on to outclass indices around the world by vivaciously rallying by close to a percent in the session and settled above the psychological 9,600 (Nifty) and 31,200 (Sensex) levels. Sentiments got a boost with report that the government has ramped up capital spending by nearly 60% in the first two months of the current financial year, in a bid to perk up investment sentiment and crowd in private investment. Early passage of the budget in March has allowed the government start spending from the beginning of the new financial year in April. In April-May, the government spent Rs 52,536 crore, 58% more than the year earlier period.  Adding optimism among investors, Moody’s said GST will be credit positive for India. Implementation of the goods and services tax (GST) will be positive for India's rating as it would lead to higher GDP growth and increased tax revenues. Some support also came with IMD report indicating that the first month of monsoon has been heartening with India recording a 4% surplus in rainfall combined with a well-distributed pattern, except in the eastern regions. The average rainfall in June was 170.2mm, 7mm higher than the usual 163.6mm. Traders paid no heed to the report stating that manufacturing activity in India fell to a four-month low in June amid softer rise in factory new orders. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI)-a composite single-figure indicator of manufacturing performance-slipped to 50.9 in the month of June as against 51.6 in the month of May. Finally, the BSE Sensex gained 300.01 points or 0.97% to 31221.62, while the CNX Nifty was up by 94.10 points or 0.99% to 9,615.00.