Markets to get a good gap-up start on Fed’s decision

The Indian markets seems to have sensed the dovish stand of the Fed and had started celebrating from the last session itself with gain of about a percent. Today, the markets extending the momentum are likely to make a gap-up start and the major bourses may once again touch the year’s high level. The major movement that will be eyed today is of rupee, as the dollar has weakened after the Fed’s decision and the domestic currency, like other emerging market currencies is likely to strengthen further. Traders will also draw encouragement with Economic Affairs Secretary (DEA) Arvind Mayaram’s statement that economic growth will pick up in the third and fourth quarters of the current fiscal and the government will be able to meet its fiscal deficit target. Meanwhile, the government has issued “safe harbor” rules to bring greater clarity in cross-border transactions, easing the deal for multinationals and Indian companies with overseas arms. There will be buzz in the pharma sector, as the Industry Department, in its draft Cabinet note has placed the responsibility on the Health Ministry for identifying the sectors where takeovers would not be permitted. The draft note has also proposed that foreign investors be mandated to create at least 25 per cent additional capacity and generate additional employment.

The US markets surged in last session, as Fed refrained from tapering stimulus program at its highly anticipated monetary policy meeting. The Fed said it would continue to purchase bonds at a pace of $85 billion per month. The Asian markets have made a jubilant start on Fed’s decision, though some of the indices in the region are closed for public holidays, unable to participate in the global rally.

Back home, Indian equity benchmarks, coming out of their consolidation mood, snapped the session near their intraday high with Sensex and Nifty closing around their psychological 20,000 and 5,900 levels, respectively as sentiments turned upbeat in last leg of trade on expectation of dovish tapering stand from Fed. Earlier in the absence of positive triggers, barometer gauges gyrated slightly above their neutral lines, as investors opted a wait and watch policy ahead of outcome of the US Federal Reserve meeting and Reserve Bank of India’s (RBI) monetary policy review. Sentiments also remained dampened after most of the Asian equity indices ended in the red awaiting outcome of the FOMC meeting that will help determine the pace and quantum of stimulus tapering by the US central bank. However, the latter half showed a U-turn for Indian bourses, as market-participants drawing some positive cues from the opening of European counterparts, bought fundamentally strong blue chip stocks. Back home, some strength to the bourses came in from strengthening rupee against dollar. The rupee was trading at Rs 63.25 at the time of equity markets closing as compared with previous close of Rs 63.37 per dollar. Investors’ confidence also got some boost on report that foreign direct investment (FDI) into India increased by 12.9 percent on y-o-y basis to $1.66 billion in July from $1.47 billion recorded in the same month of previous fiscal, highest in the previous three months. During April to July period of current fiscal, FDI inflows were up by 20 percent to $7.05 billion over the same period of previous fiscal. Buying in realty and banking counters continued for third straight day as investors went for beaten down stocks in the sector. Meanwhile, shares of jewellery companies like Titan Industries, Tribhovandas Bhimji Zaveri (TBZ), PC Jeweller, Gitanjali Gems, Shree Ganesh Jewellery House (India) and Goenka Diamond & Jewels edged higher during trade after the government increased the customs duty on gold and silver jewellery by five percent to 15% to protect the domestic industry. Finally, the BSE Sensex gained 158.13 points or 0.80% to settle at 19962.16, while the CNX Nifty added 49.25 points or 0.84% to settle at 5,899.45.