Markets likely to make positive start amid surcharge rollback hopes

Indian markets ended higher with gains of over one and half a percent each on Thursday mainly on the back of late hour buying led by IT and auto stocks along with a rise in global stock markets. Today, the markets are likely to continue jubilation with positive start tracking firm global cues and reports that the government is likely to withdraw higher surcharge on foreign portfolio investors (FPIs). In a bid to ease the concern of FPIs over the increased surcharge announced in the Budget, the Finance Ministry is considering grandfathering the income earned by them up to the Budget (July). Under the proposal, FPIs that are so far structured as trusts will not have to pay the increased surcharge. But if they don’t change their structure, they will have to pay the surcharge from the set date. Besides, investors will also be looking ahead to the Index of Industrial Production (IIP) release later in the day. Traders may take note of report that India Inc demanded a stimulus package of over Rs 1 lakh crore to kick-start investment cycle and revive the economy which is showing signs of a slowdown. Meanwhile, to help startups to move from the Innovators Growth Platform of stock exchanges to the mainboard for regular trading, regulator Sebi is planning a new set of norms to allow them to shift after one year of trading and expanding their shareholder base to at least 200. However, there may be some cautiousness with India Ratings’ report that the massive Rs 3 trillion capital infusion by the government into state-run banks over the past six years has helped them reduce losses but has failed to boost credit growth. There will be some reaction in auto stocks with report that the Centre gave nod to 5,595 electric buses (e-buses) for inter- and intra-city transportation in 64 cities, giving a thrust to last-mile connectivity and continued electric mobility push. There will be some buzz in the aviation stocks with the International Air Transport Association’s (IATA) data showing that India's domestic air passenger traffic rose 7.9 percent in June over the year ago period even as the average demand for domestic travel across seven major aviation markets declined in the reporting month to 4.4 percent from 4.7 percent earlier. There will be some reaction in power stocks with Power Minister R K Singh’s statement that in a bid to encourage domestic manufacturing, India will increase import duty on solar equipment down the value chain in the coming years.

The US markets rose on Thursday as global bond yields rebounded. Asian markets are trading in green on Friday, helped by China’s better-than-expected export figures but fresh concerns about Sino-US trade ties capped the gains.

Back home, bulls roared back over Dalal Street on Thursday, with Sensex & Nifty gaining over 630 & 175 points, respectively, after reports said the government was looking to roll-back the recently imposed higher tax on the foreign portfolio investors (FPIs). After a firm start of the day, key indices remained in green for the most part of the session, as the India Meteorological Department showed that India received 28% more rainfall than the 50-year average in the week to August 7, easing concerns of drought. Monsoon rains are crucial for farm output & economic growth, as agriculture forms about 15% of India's $2.5-trillion economy. The street overlooked Reserve Bank of India’s (RBI) report that consumer confidence declined in July as reflected in the current situation index; the future expectations index fell by about 4 points. Markets extended gains in the last leg of the trade, as RBI announced two key measures to help non-bank financial companies (NBFCs) which are facing a severe liquidity squeeze. The first is harmonisation of single counterparty exposure limit for banks' exposure to single NBFCs with the general single counterparty exposure limit. The central bank has decided to raise a bank's exposure limit to a single NBFC to 20 per cent of tier-I capital of the bank. The second initiative deals with credit to the priority sector. The street also took a note of EEPC India chairman, Ravi Sehgal’s statement that the central bank should ensure easy credit disbursal to exporters, especially in the MSME sector. Finally, the BSE Sensex gained 636.86 points or 1.74% to 37,327.36, while the CNX Nifty was up by 176.95 points or 1.63% to 11,032.45.