Markets Turn Buoyant

It was a quite surprising up-move for the Indian equities yesterday. We are saying surprising as not many clues were indicating towards such a spurt. Just to put the numbers in perspective,  benchmark share indices ended over 1% higher with state-owned banks rallying the most amid reports that the government has decided to create a holding company structure for them before the Budget. Sensex closed 289 points higher or 1.2% up and Nifty ended up 93 points or 1.3% up at 25,389 and 7,602 levels, respectively. The broader markets outshined the benchmark indices. BSE Midcap and Smallcap indices ended up 1.8%, each. All major indices ended in green. BSE Power index led the rally, up 2.8% followed by Capital goods and Healthcare indices, up 2.3% and 2%, respectively. In contrast, Auto shares lost sheen on the BSE with BSE Auto index up marginally by 0.3%. Moreover, shares of state-owned banks rallied by up to 8% on the NSE including Andhra Bank, Indian Overseas Bank, Bank of Baroda, Punjab National Bank, IDBI Bank and State Bank of India which closed 2-4% higher after the government decided to create a holding company structure for public sector banks before the Budget.

Good amount of macro data was announced yesterday. The fiscal deficit in the first two months of 2014-15 was Rs 2.4 lakh crore or 45.6 percent of Budget Estimates for the whole financial year. The fiscal deficit -- the gap between expenditure and revenue -- for the whole fiscal has been pegged at Rs 5.28 lakh crore. The deficit during the same period last year was 33.3 percent of Budget Estimates.

Petrol price was hiked by a steep Rs 1.69 per litre and diesel by 50 paise a litre as the crisis in Iraq spooked international oil and currency markets. The hike, effective midnight tonight, excludes local sales tax or VAT and the actual increase will be higher, varying from city to city. We have been updating our readers about the expected price hike in fuel prices on account of prolonged Iraq crisis. We feel this would add to the inflation pressure and may affect the markets as already the food inflation Worries are looming large on account of delayed monsoon.

As for the US markets, The Standard & Poor’s 500 Index was little changed, capping the longest string of quarterly gains since 1998, as a jump in pending home sales offset weaker-than-forecast manufacturing data. The S&P 500 fell less than 0.1 percent to 1,960.23. The equity benchmark gauge rose 4.7 percent for the June quarter, a sixth consecutive advance. The Dow Jones Industrial Average lost 25.24 points, or 0.2 percent, to 16,826.60, trimming its quarterly advance to 2.2 percent. The Nasdaq Composite Index rose 0.2 percent, giving it a 5 percent increase for the three months.

Asian markets however are trading in positive zone. Bloomberg news reports suggested that Asian stocks rose, with the regional index headed for six-year high, as Japanese stocks rallied with investors weighing a survey of business sentiment. Nikkei is trading with gains of 200 points or (1.31%). But Shanghai Composite is trading almost flat with negative bias.

SGX Nifty is providing positive signals and is trading with gains of 23 points or (0.29%). We expect a positive opening for the Indian equities. However we expect some profit booking in early hours of trade.