Volatility To Persist

Indian equity indices trimmed losses in late trades to end near their crucial support levels even as sugar stocks rallied on the back of sharp hike in import duty. After witnessing a significant downside indices recovered towards the fag end of trading hours. Sensex ended down 74 points and the Nifty ended down 18 points at 25,031 and 7,493 levels, respectively. The broader Markets outshined their largecap counterparts with BSE Midcap and BSE Smallcap rising 0.6% and 0.5%, respectively. The market breadth ended positive with 1562 advances and 1387 declines.

While the markets remained highly volatile, there was one announcement everyone was awaiting for. Finance minister Arun Jaitley will present the budget for the 2014/15 financial year on July 10, government sources said, three days after the parliament begins its budget session. The new government, led by Prime Minister Narendra Modi, will present the railway budget on July 8 and the country's economic survey on July 9. The budget session of parliament is scheduled to conclude on Aug.14. We feel this would provide a much needed direction to the Indian equity markets.

However Geopolitical situation is likely to remain a cause of concern. Iran's supreme leader accused the United States on Sunday of trying to retake control of Iraq by exploiting sectarian rivalries, as Sunni insurgents drove toward Baghdad from new strongholds along the Syrian border. Ayatollah Ali Khamenei's condemnation of U.S. action in Iraq came three days after President Barack Obama offered to send 300 military advisers in response to pleas from Iraq's government. It ran counter to speculation that old enemies Washington and Tehran might cooperate to defend their mutual ally in Baghdad after two weeks of swift territorial gains by Sunni Islamists.

Another Concern for the Government is deficient Monsoon. Rather the data announced by Indian Meteorological Department (IMD) stated that till June 23rd, there is 37 per cent below normal monsoon.  With railway fares already planned to be hiked and even the crude prices moving northwards, there is a high possibility that the Inflation would inch upwards as deficient monsoon would affect the food inflation also.  

One factor that is likely to be on the minds of every investor is the Gas pricing formula. It is true that Gas prices are likely to move upwards, however the hike is likely to be less than what was proposed by the UPA Government. Some reports suggested that it may be around USD 6.8 against the earlier proposed USD 8.4 per unit.

While this was on the domestic front, ion the global front U.S. stocks fell, with the Standard & Poor’s 500 Index dropping for the first time in seven sessions, as General Electric Co. led industrial shares lower to offset gains among energy producers. The S&P 500 fell less than 0.1 percent to 1,962.61, nearly erasing an earlier decline of 0.2 percent in the final 15 minutes of trading. The Dow Jones Industrial Average lost 9.82 points, or 0.1 percent, to 16,937.26.

Even the Asian Indices are likely to remain under profit booking pressure and early trading cues suggest the same. While Nikkei is trading with loss of 0.51%, Shanghai Composite is trading in red with loss of 0.11%. Hang Seng however is in green with gains of 0.31%.

The SGX Nifty is trading with gains of 22 points (up 0.29%) at 7529. We feel, though the Indian equities are likely open on positive note, it is also likely to remain range bound today.