Indian Markets In A Sweet Spot.

Indian equity markets are really in a sweet spot where Bulls have taken a charge. At least the way Indices soared yesterday to new high levels it seems so. Yesterday, Benchmark share indices ended at record closing highs as the cut in statutory liquidity ratio by the Reserve Bank of India at its policy meet will inject liquidity, paving the way for credit growth revival.

As a result Sensex ended higher by 174 points at 24,859 and the Nifty closed higher by 53 points at 7,316. The Sensex and Nifty touched an intra-day high of 24,892 and 7,425 levels, respectively. The broader markets performed well in line with the benchmark indices - BSE Midcap and Smallcap indices ended higher by nearly 1%. The market breadth in BSE ended positive with 1,920 shares advancing and 1,092 shares declining.

It was the RBI policy which was a major event. The RBI in the bi-monthly monetary policy review yesterday kept the repo rate unchanged at 8% as per the street's expectations. The Cash Reserve Ratio (CRR) was also unchanged at 4% of net demand and time liabilities (NDTL). However, the Statutory Liquidity Ratio (SLR) was reduced by 50 basis points to 22.5% of banks NDTL with effect from the fortnight beginning June 14.

Besides, RBI also reduced the liquidity provided under the export credit refinance (ECR) facility from 50% of eligible export credit outstanding to 32% with immediate effect. The SLR cut will be effective June 14. RBI also introduced a special term repo facility of 0.25% of NDTL to compensate fully for the reduction in access to liquidity under the ECR. Sentiment was also supported after the RBI eased rules to spur bank lending and toned down its inflation rhetoric in moves set to be welcomed by a new pro-business government determined to revive economic growth. Apart from above factors a good support came in from FII buying to the tune of more than Rs 550 Crore and DII buying also to the tune of Rs 100 crore.

As for the US markets, the Dow Jones industrial average fell 21.29 points or 0.13 percent, to end at 16,722.34. The S&P 500 inched down just 0.73 of a point or 0.04 percent, to 1,924.24. The Nasdaq Composite dropped 3.12 points or 0.07 percent, to 4,234.08.

While the US markets closed with marginal losses, Asian equity indices are also showing mixed trends as investors await a report on U.S. jobs and a decision from the European Central Bank on monetary policy. While Nikkei is trading in red with miniscule losses, Hang Seng is trading in red with loss of 0.53%. Even Shanghai Composite is trading in red with loss of 0.41%.

SGX Nifty is trading in green with marginal gains of 0.13% or 10 points. We expect the Indian equity indices to open on a flattish note and then make a up-move afterwards.