Markets to get a positive start on supportive global cues

The Indian markets recovered modestly in last session, though the mood remained cautious due to the volatility in the rupee. Today, the start is likely to be good as the global markets seems to be stabilizing; however volatility too can be expected on the penultimate day of F&O series expiry. Traders will be taking some support with the report that government will speed up decision on hiking FDI limits, as Finance minister P Chidambaram has indicated that a final decision may be taken by the second or third week of July and has asserted that there was no room for pessimism as the fundamentals of the Indian economy are strong. There will be buzz in the market, as the Securities and Exchange Board of India (Sebi) has tightened share buyback norms to make the process more credible and has simplified foreign investment rules in a bid to bring back the FII money into the equity markets. Though, the gold related stocks are likely to remain under pressure, as the Reserve Bank has further tightened norms for lending against gold coins as well as units of gold ETFs and mutual funds by Regional Rural Banks (RRBs) with an aim to curb demand for the precious metal.

The US markets regained some ground in the last session and all the major indices moved around a percent on getting some upbeat economic data. There was a bigger than expected increase in durable goods orders in May. The Asian markets have made a mixed start, some indices have recovered taking cues from the US market, though the Chinese market was trading in red, as the interest rate swaps fell for the most since 2008.

Back home, key domestic bourses, after hitting two-month lows in previous session, recouped some of their losses on Tuesday on the back of short-covering witnessed in beaten down blue-chip stocks. Though, local benchmarks proved incapable of managing a spectacular close despite surpassing their crucial 5,650 (Nifty) and 18,800 (Sensex) levels in mid noon trade, as profit booking in last leg of trade mainly pull the benchmarks off their highs. Even though, both the frontline gauges ended the session above their crucial 5,600 (Nifty) and 18,600 (Sensex) bastions. Soon after opening into the green terrain local benchmarks entered into the negative trajectory as selling pressure was triggered by Chinese benchmarks, slumping over 6 per cent in intra-day trade hitting their lowest since early 2009, but the downtrend proved short-lived for Indian equity markets as they regained positive terrain after Chinese markets recovered after its central bank reassured that appropriate liquidity would be maintained to support growth. Firm opening in European markets too provided required fillip to the domestic markets.  Sentiments also got some support from Reserve Bank of India (RBI) Deputy Governor Anand Sinha’s statement that the government and the central bank are taking all possible steps to get a control over the economy; he also said that financial sector is bound to grow in tandem with the growth of the real economy. Rally in infrastructure and realty counters too helped the up-move as the RBI has said that developers building low-cost or affordable houses can avail of foreign currency loans on softer terms than other builders of real estate. However, the gains remained capped after shares of the companies engaged in gems and jewellery business extended losses on Tuesday on rising worries that the Reserve Bank of India’s and government initiative to curb gold imports may impact growth and earnings going forward. Finally, the BSE Sensex gained 88.26 points or 0.48% to settle at 18,629.15, while the CNX Nifty rose by 18.85 points or 0.34% to end at 5,609.10.