Markets Likely To Sustain Up Move

It seems that everything is falling in place for the Indian equities now. At least the way equity indices had recovered yesterday after witnessing a consistent fall in past few trading sessions. However the recovery in rain falls and few offerings from the Government for infrastructure sector helped the indices recover smartly. Yesterday, amid high volatility the Indices closed with significant gains. While the Sensex was up by 222 points to close at 25229, Nifty closed at 7527 (up 73 points).

While one of the most important factors was recovery in rainfall, the Government has offered other benefits to the infrastructure players also. In a move that will help infrastructure companies and affordable-housing projects raise long term funds at a reasonable cost, the Reserve Bank of India yesterday issued norms for long term bond issues by banks. The money raised by banks through these long term bonds for loans to infrastructure firms, will be exempt from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements that other bank deposits are subject to. In addition, these long term bonds will also be exempt from meeting priority lending targets for banks. The notification came close on the heels of Finance Minister Arun Jaitley's announcement in the Union Budget on July 10, who said these norms would be put out soon. We feel this will be a big positive for the infrastructure players as well as the realty players.

While this was one good factor, the SEBI again came in to action and issued an order against the executives in Satyam fraud case. The executive have been directed to pay Rs 18500 crore with 12% interest rate per year from January 2009 till the payment is made. We feel the action against the fraudulent activities would be welcomed on Dalal Street and is also indicative of providing teeth to capital market watch dog.

On the global front, The Standard & Poor’s 500 Index fell, following rebound in earlier trading session, as Federal Reserve concerns about valuations among social-media and biotech companies overshadowed better-than-estimated bank earnings. The Dow Jones Internet Composite Index slumped 0.7 percent and the Nasdaq Biotechnology Index lost 2.3 percent. The S&P 500 fell 0.2 percent to 1,973.28 and the Russell 2000 Index (RTY) of smaller companies slumped 1 percent. The Dow Jones Industrial Average rose 5.26 points, or less than 0.1 percent, to 17,060.68, buoyed by JPMorgan and Goldman Sachs. Apart from that the US Federal suggested that increase in Federal Funds rate will likely occur sooner and be more rapid if labor market continues to improve.

Taking the cues from US markets, even the Asian equity indices are quite volatile. Leading equity indices declined and entered a red zone after opening in green. While Nikkei is trading flat with hardly any gains, Hang Seng is marginally in Green with gains of 0.20%. However the indices like Shanghai Composite and Taiwan are trading with some marginal cuts.

SGX Nifty is trading with significant gains of 28 points (0.37%). With so many positives we expect the Indian equity indices to open in green and then sustain its momentum in early hours of trade.