Markets to get a positive start; new series to begin on a strong note

The Indian markets ended the terrible June series on a positive note and the start of the new series is likely to be cheerful tailing global cues. On the domestic front too, there are some developments that can help the markets move higher. Government late evening approved a complex formula that would double the price of gas to $8.4 per unit from all domestic fields operated by government and private oil firms. At present, gas from ONGC and OIL’s fields as well as Reliance Industries' KG-D 6 block is priced at $4.2 per unit. These companies are likely to rejoice with the decision while Power, CNG and urea will become costlier from April 1 next year, so the stocks related to them, too will be in action. However, there will be some concern as well, as the RBI Governor D Subbarao has said that slowdown in growth is the most worrisome factor as industrial activity is stubbornly subdued and services remain below the trend, also the volatile capital flows have made the country vulnerable to "stops and reversals". The gold related companies are likely to come under further pressure, as in an effort to rein-in a record-high current account deficit, the RBI has said that imports of the precious metal against suppliers’ or buyers’ credit will be on 100 per cent cash margin and on document against payment basis.

The US markets continued their rally mood for the third consecutive day supported by few more positive economic reports, while there was a modest decline in the initial jobless claims in the week gone by than the personal income rose by 0.5 percent in May. Asian markets too have extended their euphoric mood and all the major indices are trading with good gains.

Back home, the June series Futures and Options contract settlement turned out to be an encouraging event for the Indian equity markets as bulls showed strong buying interests in majority of the blue chip stocks. Boisterous benchmarks showcased an enthusiastic performance on Thursday by rallying over one and a half percentage points and breaking lot of psychological levels in their northbound journey. There appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength, as investors continued hunt of fundamentally strong but oversold stocks. Frontline indices managed to finish the session near their intraday highs to settle above 5,650 (Nifty) and 18,850 (Sensex) levels as investors took to hefty across the board buying. Sentiments remained jubilant after the Reserve Bank of India (RBI) surprised markets by announcing the current account deficit a day in advance. India’s current account deficit (CAD) stood at $18.1 billion or 3.6 per cent of the GDP in the March quarter, sharply lower than the $21.7 billion deficit a year earlier. The current account gap for the full fiscal year ending in March 2013 was $87.8 billion, which was 4.8 per cent of GDP, compared with $78.2 billion a year earlier. Meanwhile, the balance of payments for the January-March quarter was $300 million surplus, compared with a $600 million deficit a year ago.  Supportive cues from US markets provided the much needed support to local markets initially. Meanwhile, European markets too opened slightly in the positive. Back home, recovery in Indian Rupee too aided the sentiments as it gained 50 paise against the US dollar, backing off from a record low hit in the previous session, as the country’s CAD narrowed in the January-March quarter, easing some concerns about the funding of the deficit. The rupee was up at 60.21 to the dollar at the time of equity markets closing, recovering from a record low of 60.76 hit on June 26. Up-move was also supported by buying in oil and gas counter with stocks like Oil and Natural Gas Corporation of India (ONGC), Reliance Industries, Oil India, Cairn India and Gail India edging higher ahead of Cabinet Committee on Economic Affairs (CCEA) meeting to decide on raising natural gas prices for the first time in three years. Additionally, traders continued to hunt software and technology stocks on the back of recent weakness in rupee against the dollar. Finally, the BSE Sensex surged 323.83 points or 1.75% to settle at 18,875.95, while the CNX Nifty climbed by 93.65 points or 1.68% to end at 5,682.35.