Value Buying To Keep Indices Buoyant

Call it a short covering or value based buying, the Indian equity markets witnessed a good up-move yesterday as the Nifty closed above the 7600 mark and Sensex closed at 25549 (Up 321 points). If we take a close look t the sectors that helped the indices stage a smart recovery towards the fag end of markets closing hours, sectors were Banks, Oil &Gas, Metals and Capital goods. On the economic data front, June trade deficit touched 11-month high to USD 11.76 billion against USD 11.23 billion in previous month and USD 11.28 billion in year-ago period. Even though the exports rose 10.2 percent to USD 26.48 billion (Y-o-Y), it declined from USD 28 billion on a month-on-month basis. “The numbers were almost in line with expectations.

Apart from this the monsoon deficit narrowed to 36% from the levels of 46% earlier. Good rain was witnessed in majority of areas resulting in some solace. We are of the opinion that the possibility of good rainfall in rest of the monsoon season may help Indian government curb the food inflation.

Another factor which is good for the Indian equities is, many companies are now planning to tap the primary market floor. Many bigwigs have been sitting in the side lines for long waiting for a right opportunity. We feel Indian equities would witness a strong flow of IPOs starting from Q2FY15. Investment bankers have been quite up-beat on the same.

On the global front, US stocks advanced, sending the Dow Jones Industrial Average to an all-time high, as companies from Time Warner Inc. to Intel Corp. rallied amid deals and earnings reports. The Standard & Poor’s 500 Index added 0.4 percent to 1,981.57. The Dow increased 77.52 points, or 0.5 percent, to a record 17,138.20. The Russell 2000 Index of smaller companies fell 0.2 percent, after slumping 1 percent yesterday amid Federal Reserve concerns over valuations. Fed Chair Janet Yellen said yesterday that asset valuations in general are not out of line with historical norms, after a central bank report on Tuesday indicated prices for smaller social-media and biotechnology companies are substantially stretched. However worries regarding the same, seem to have receded.

Taking cues from US markets, Asian indices are also trading in green. Nikkei is trading with gains of 43 points (Up 0.29%) and Hang Seng is trading with 0.15% gains. Shanghai Composite is however trading in red with loss of 0.44%.

The SGX Nifty is trading with marginal loss of 3 points to trade at 7653. However looking at the kind of strong closing provided by the index yesterday, we are expecting another round of positive opening for the Indian equities. Rather the kind of economic data Indian markets have witnessed in the past week may help the indices regain their up-ward momentum. Consumer inflation in June stood at 7.3% and even the WPI declined to 5.4% in June (a four month low). Further the data on IIP front and Manufacturing PMI also witnessed a significant improvement. We feel, with macro factors showing a significant improvement Indian equities are likely to sustain up-move.