The Indian markets remained in jubilant mood in last session, adding gains to their biggest rally of the year as the global cues remained sanguine and on hopes that RBI will be cutting the rates in its forthcoming policy meet, though they pared some gains as the Union Cabinet deferred the decision on Pension Bill. Today, the start is likely to be soft-to-flat and the markets are likely to consolidate after around four percent of gains in last two days. Profit booking too can be expected in commodities and infra stocks. Traders will be eyeing the movement of rupee which has surged to two weak high and its further appreciation may support the market sentiments. Meanwhile, there will be buzz in the banking sector as the Union Cabinet, has approved a capital infusion of Rs 632 crore into the cash-starved regional rural banks (RRBs) to improve their capital adequacy norm.
Meanwhile, there is good news, as various derivative instruments, such as interest rate and currency swaps, will not attract service tax from July 1 when the country switches over to the negative-list regime.
The US markets consolidated after last session’s rally on Thursday after Federal Reserve Chairman Ben Bernanke dimmed hopes for further stimulus measures and Fitch downgrade of Spain’s credit rating, cutting early gains after Chinese central bank’s cut in lending and deposit rates. The Asian markets have made a soft start with most of the indices trading lower by over half a percent, US Fed chief Bernanke’s non-committal stance on additional stimulus overshadowed the People’s Bank of China’s decision to lower its benchmark lending and deposit rates by 25 basis points.
Back home, stock markets in India sustained the sanguine mood on Thursday helping the benchmark equity indices to enthusiastically rally by over four percentage points since the start of this week and quadruple the joy of closing in the positive territory. Given that the key gauges managed to build over a percent gains over previous session’s close to three percent rally, bullishness seems to be returning to the markets as investors aggressively piled up positions in key heavyweight stocks ahead of a slew of key events in India and across the world. The spurt in benchmarks not only was due to sanguine leads from the global markets but also because of encouraging local cues like the appreciation in the beleaguered rupee and government’s reform push. After the gap-up opening, the frontline gauges traded with strength for most part of morning trades, but investors showed signs of profit booking in late morning trades, dragging the key indices to day’s lows. Nevertheless, the key indices managed to rebound in style from those levels and eventually settle a tad below the important psychological 5,050 (Nifty) and 16,650 (Sensex) levels. Sentiments remained sanguine since the start as domestic markets climbed in tandem with their regional peers as market participants remained influenced by sharp rally overnight in US markets where the Federal Reserve stated that the US economy maintained a moderate pace of growth as factory output rose and the real-estate market improved. Investors resorted to largely across the board buying as they hoped government would push reforms and prop up investment sentiment. Meanwhile, Prime Minister Manmohan Singh’s effort to push for infrastructure led economic recovery too spurred some positive vibes that the government is taking serious steps to dispel perceptions that it is in policy paralysis. Investors also drew some solace after Indian rupee, which has so far been the worst performing currency in Asia, appreciated for the fourth consecutive day against the US dollar. The rate sensitive Realty and Banking counter witnessed relentless buying in the session as they jumped over two percent and remained the top gainers in the BSE sectoral space on increasing hopes of monetary easing by RBI in its forthcoming mid-quarter policy review on June 18. Finally, the BSE Sensex soared 194.75 points or 1.18% to settle at 16,649.05, while the S&P CNX Nifty jumped 52.55 points or 1.05% to close at 5,050.65.
