Markets likely to make pessimistic start of F&O series expiry week

Indian markets ended higher on Friday, with gains of over 1.5 per cent each, as investors cheered Prime Minister Narendra Modi's landslide win in Lok Sabha election as well as a steep fall in oil prices overnight. Today, the start of the F&O series expiry week is likely to be pessimistic, tailing the mixed global cues. Market-participants will be eyeing Q4 GDP data, scheduled to be announced later in the week. There will be some cautiousness with a report that foreign investors have pulled out a net amount of Rs 4,375 crore from the Indian capital markets in May so far, driven by global and domestic factors. Also, the Reserve Bank of India’s (RBI) data showed that after rising for the past few weeks, the country's foreign exchange reserves declined $2.057 billion to $417.998 billion in the week to May 17 on account of a fall in foreign currency assets. Traders will also be concerned about a report stating that the fourth quarter (January to March 2019) financial results released by 304 companies in the corporate sector show a sequential drop in revenue growth to 10.7 per cent from 20.1 per cent in the previous quarter (October to December 2018). Traders may take note of a report that the upcoming Budget in July may revise the fiscal deficit of 3.4 per cent upwards in view of the need to step up public expenditure to beat the economic slowdown while keeping in mind tax revenue are not going to grow at the required pace to match up with increased expenditure. However, traders may take some encouragement later in the day with the RBI’s statement that it will inject Rs 15,000 crore into the financial system next month through purchase of government bonds via the auction route. The decision has been taken in view of the evolving liquidity situation. There will be some buzz in the banking sector stocks with report that public sector banks (PSBs) have recovered close to Rs 1.2 lakh crore from stressed assets during the financial ended March, primarily helped by resolution under the Insolvency and Bankruptcy Code (IBC). There will be some reaction in Non-Banking Financial Companies’ (NBFCs) stocks with report that the RBI proposed a set of guidelines for large NBFCs to help them deal with severe liquidity problems and prevent re-occurrence of IL&FS type of debt crisis. There will be lots of earnings reaction to keep the markets buzzing.

The US markets ended higher on Friday amid easing trade concerns as President Donald Trump said he remains hopeful of a US-China trade deal. Asian markets are trading mixed on Monday as investors watched for developments from US President Donald Trump’s state visit to Japan as well as results from the European parliamentary election.

Back home, Indian equity benchmarks settled at lifetime closing high on Friday, as investors felt assured of policy stability after a decisive mandate for the Narendra Modi-led BJP in the general elections. The markets made a firm start of the day, aided by Fitch Ratings’ latest report stating that a landslide victory of the Bharatiya Janata Party (BJP) marked an easing of political uncertainty and is expected to improve business sentiment and the outlook for private investment. From a credit rating perspective, it would focus on the extent of the next government's efforts to improve India's weak fiscal finances. The street took a note of Central Board of Direct Taxes’ (CBDT) latest notification that senior citizens with a taxable income of up to Rs 5 lakh can now submit in banks and post offices Form 15H to claim exemption from Tax Deducted at Source (TDS) on interest income on deposits. Earlier, the limit for seeking TDS exemption was Rs 2.5 lakh. Markets further gained traction to end the trading session with fabulous gains of over 1.50%, following firm European markets. Key indices were optimistic amid reports that major industry bodies have hailed the election verdict and said the transformation of India is on a fast track with several innovative mega missions under the leadership of Prime Minister Narendra Modi. Vikram Kirloskar, President of the Confederation of Indian Industry (CII) said that the decisive election results will propel India's growth pace to the next orbit and drive the transformation of the country. Meanwhile, Moody’s Investors Service in its latest report said that its credit view on the country will depend on policies of the new government. As per the trend, BJP-led National Democratic Alliance (NDA) will form the government at the Centre for the second successive term with absolute majority. Finally, the BSE Sensex gained 623.33 points or 1.61% to 39,434.72, while the CNX Nifty was up by 187.05 points or 1.60% to 11,844.10.