Indices To Extend Gains

It seems Indian equities are witnessing a good pre budget rally ahead of the Union Budget Scheduled on July 10th. At least the way Indices have moved northwards in preceding two trading sessions despite the issues like Iraq crisis and delayed monsoon worries, indicates towards the same.

After witnessing a Smart rally on Monday, Yesterday also the Sensex gained 102 points to close at 25516 (0.40%) and nifty closed at 7634Up 23 points (0.31%). While the leading benchmark indices moved steadily, it was the mid cap and small cap indices that posted smart gains. While Midcap index closed at 9433 (Up 0.58%), Small Cap gained more than 1 per cent to Close at 10321.

This is quite a confusing picture as the data by IMD stated that there is 43% deficient monsoon this year till Date. This now clearly indicates that the inflation Worries are going to re-emerge on the surface. In the past we have seen the ill effects of inflation (especially food inflation). With RBI already remaining under pressure, we feel there are going to be some challenges ahead of the BJP government also in terms of presenting a budget.

In a recent speech, Finance Minister has categorically stated that, the Government would be looking for a fiscal prudence rather than spending mindlessly on populist measures. Hence we feel, there are going to be some tough decisions coming our way in up-coming union budget. There is surely a long wish list of the industry players on various fronts. However, not many may be granted this budget.

While many on the street may take it as a negative factor, the leading rating agencies are taking it very much positively. International rating agency Fitch stated that, India's economic growth will accelerate to 5.5 percent this financial year and 6.5 percent in FY16 due to the clear mandate received by the pro-reform Narendra Modi government.

Apart from that results season for the June quarter would start pouring in soon. Infosys is likely to announce results on July 11th. These are the factors that are likely to affect the markets in near term.

As for the US markets, Strength in manufacturing pushed the Dow Jones Industrial Average to within two points of 17,000 for the first time, joining small caps and transportation stocks at records in a pattern that chart analysts consider bullish. The Dow increased 129.47 points, or 0.8 percent, to 16,956.07. The Standard & Poor’s 500 Index climbed 0.7 percent to 1,973.32.

Asian indices are also trading with smart gains as Nikkei is up 0.57% followed by Straits Times up 0.51%. Hang Seng is the Major gainer with gains of more than 1%. Shanghai is trading almost flat with positive bias.

SGX nifty is trading in positive with gains of 50 points (Up 0.65%). We expect the India n equities are likely to open in positive zone. Rather the way Indian automobile sector sales numbers came in, it indicated towards a positive change in the Indian commercial vehicle space along with four wheeler and two wheeler segment. Hence expect a good positive gap-up opening for Indian equities today.