Positive Opening On Cards

As expected it was a week of consolidation for Indian equity markets. With Geopolitical factor hovering over the global equities, it was anyway expected. As a result the Benchmark indices settled lower this week as investors turned cautious amid tensions in Iraq ad weak rupee against dollar. India’s concern for crude oil rose amid media reports of attacks on NATO fuel trucks on the Afghanistan-Pakistan border. Increase in crude oil prices has raised concerns of increase in fuel price inflation and increase in India's current account deficit and fiscal deficit.

Meanwhile, in tandem with weaker equities, the rupee closed 10 paise lower at 60.18 against the USD driven by higher oil-related demand for the American currency, extending its string of weekly losses to four.  BSE Sensex fell 122 points or 0.5% to 25,106 and the 50-unit CNX Nifty slipped 31 points or 0.41% to 7,511. However, the broader markets outperformed the benchmark indices. BSE Mid-Cap index rose 26 points or 0.3% to 8,961.96 and BSE Small-Cap index rose 87 points or 0.90% to 9,761.

On the macro-economic front, the annual rate of inflation based on the monthly wholesale price index (WPI) accelerated to 6.01% for the month of May 2014, from 5.2% in April 2014, data released by the government on Monday, showed.  The WPI inflation for March 2014 was revised upwards to 6%, from 5.7% reported earlier. The monsoon has covered half of the country four days behind the usual schedule. Meanwhile, all India seasonal rainfall from 1 to 18 June 2014 was 45% below long period average, the India Meteorological Department said on its website on Thursday, 19 June 2014.

While this is a scenario of past week, there are few other factors expected to drive the markets going ahead. With the railway fare hike the government has directly indicated towards possible difficult steps in upcoming Union Budget. Further any more updates on the monsoon front would also help the indices get some direction. Any additional deficit to the current monsoon figures would be negative for the markets.

Amid all this the FIIs have been consistently pouring in money in the Indian markets. While in 2014 they have been net buyers to the tune of more than USD 20 billion, around USD 5 billion came in June 2014 only. We expect trend to continue in this week also despite the USD 10 billion taper announced in preceding week.

As for the other global markets, Wall Street equities rose on Friday for a sixth straight session and hit new highs, boosted by money managers convinced that US policymakers will keep a lid on interest rates through 2016. Prices of US Treasuries steadied after early declines blamed on a weak sale of inflation-linked bonds, and the dollar rose as investors chased higher US bond yields. Oil prices backed away from nine-month peaks triggered by worries about the turmoil in Iraq but held at lofty levels. US equities rallied for a sixth straight session and took the benchmark Standard & Poor's 500 and Dow Jones industrial indices to record highs. For the week, the Dow was up about 1 percent and the S&P 500 gained 1.4 percent.

As for the Asian markets the week has started on a positive note as China manufacturing PMI has arrived better than expected. The China PMI stood at 50.1 against around 49.5 in previous month. As a result Shanghai Composite is trading with gains of 0.28%. Even other equity indices are trading in green With Nikkei up 0.31%, Hang Seng up 0.41% and KOSPI up 0.51%.

Taking the cures from Asian Indices, SGX Nifty is also trading in green with gains of 0.34%.We expect Indian equity markets to open on a positive note. However as stated earlier, we expect a range Bound trader afterwards.