Markets to make a positive start of the new week

Indian equity markets ended higher on Friday, after two consecutive sessions of falls, boosted the latest weather office forecast of average rainfall during the last two months of the crucial monsoon season. Today, the start of the new week is likely to be in green, following firm global cues. Some support may also come with the Confederation of Indian Industry’s (CII) statement that with the US imposing an additional 25% duty on imports worth $34 billion from China, certain Indian products may become more competitive. Traders will also be reacting to a report that the Goods and Services Tax (GST) Council headed by Finance Minister Piyush Goyal approved setting up of a group of ministers (GoM) to tackle taxation related issues faced by micro, small and medium enterprises (MSMEs). Traders may take note of Principal Economic Adviser to the Finance Ministry, Sanjeev Sanyal’s statement that GST slabs may come down to three in addition to the exempted category, in the long-term. He also said the three slabs could be a low of 5%, a central 15% (merging the 12% and 18% slabs that exist now) and a top rate of 25%. There will be buzz in the banking sector stocks with Reserve Bank of India’s (RBI) report that bank credit grew by 12.44% to Rs 86131.64 billion in the fortnight to July 20. In the year-ago period, bank credit had stood at Rs 76598.98 billion. The report showed that during the reporting fortnight, deposits increased by 8.15% to Rs 114381.21 billion from Rs 105756.15 billion a year ago. Also, there will be buzz in the textile sector stocks with a report that the government is likely to hike import duty on about 300 textile products to boost domestic manufacturing and create employment opportunities. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets ended higher on Friday, after a string of upbeat earnings, while traders digested the Labor Department’s data showing weaker than expected job growth in the month of July. Asian markets were trading in green on Monday, after China’s central bank took steps to try to drag the yuan away from 14-month lows. The People’s Bank of China late on Friday raised the reserve requirement on foreign exchange forward positions, making it more expensive to bet against the Chinese currency.

Back home, Friday turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges ending near their all-time high levels, recapturing crucial 11,350 (Nifty) and 37,500 (Sensex) marks. After a gap-up opening, there appeared not even an iota of profit booking in the session, with benchmarks fervently gaining from strength to strength to end near intraday highs, as investors continued hunt for fundamentally strong stocks. Sentiments remained up-beat since beginning with traders taking support from a private report that India’s economic growth momentum is likely to pick up further in the April-June period and the country is expected to clock GDP growth of 7.5% in this financial year. Sentiments on the street remained positive with the India meteorological department (IMD) stating that India is set to receive average rainfall during the last two months of the crucial monsoon season that stretches between June and September. It also added that the rainfall for the country as a whole during the second half of the season is likely to be 95 percent of a long period average. Furthermore, traders took note of a report which stated that India plans to put off implementation of retaliatory import duties of $241 million against 29 products from the US by another month-and-a-half as its attempt to avoid a tariff war with the US. Markets extended gains in second half to end near intraday high levels with report that India’s services sector activity remained in the growth territory for the second consecutive month in July, as business activity witnessed the strongest growth since October 2016 amid improved demand conditions. The seasonally adjusted Nikkei India Services Business Activity Index rose from 52.6 in June to 54.2 in July. Traders shrugged off International Monetary Fund’s latest report where it stated that real interest rates in India may drop by more than 150 basis points over the next decade. It also said that a decline in the India’s dependent youth (those from ages 0-15 years) between 2020 and 2030 is expected to result in a reduction of long-term interest rates in the country. Investors also paid no heed towards former Reserve Bank Governor C Rangarajan’s statement the full implementation of recent hike in Minimum Support Prices (MSP) for some of the agricultural products may push financial system under stress. Finally, the BSE Sensex soared 391.00 points or 1.05% to 37,556.16, while the CNX Nifty was up by 116.10 points or 1.03% to 11,360.80.