Expect Choppy Session On F&O Expiry Day

Indian indices hits record high on yesterday on expectations of more stimulus from the European Central Bank, while strong U.S. data on durable goods and consumer confidence underpinned U.S shares. The Sensex edged higher for the fifth day in a row with ahead of F&O expiry. Most of the Oil & Gas stocks edged higher on hopes of announcement of reforms by the government on subsidies. IT stocks rose on positive economic data in US, the biggest outsourcing market for the Indian IT firms. The 30-share Sensex ended up 117 points at 26560 and the 50-share Nifty ended up 31 points at 7936.

As regards the possible movement of markets, there are many positive factors that are likely to help the indices move northwards. On the domestic front, Financial Technologies India Ltd (FTIL) on Wednesday fully exited Multi Commodity Exchange (MCX) by selling 5% stake on the stock exchanges. The stake was bought by SBI life, IDFC and Reliance MF, among others.

The Reserve Bank of India (RBI) on Wednesday simplified external commercial borrowing (ECB) norms. The central bank also allowed companies to raise fresh funds through ECBs where the average maturity period (AMP) exceeds the residual maturity of the existing ECB under automatic route, with certain riders. The Cabinet on Wednesday gave full authority to the road transport and highways ministry to ease the rigid model concession agreement (MCA) to speed up delivery of highway projects. MCA is the document that governs any road contract and management of project till the time a private player operates. Till now, even small changes in the MCA were referred to inter-ministerial group (IMG) for approval. Both the news is positive for infrastructure companies.

On the global front, US market finished roughly flat on yesterday, with the S&P 500 staying around 2,000 a day after, its first close above that milestone and managed to eke out its third record close in three days. Stocks drifted between slight gains and losses for much of the session. Trading was the slowest for any full session this year, and the Dow traded in its third-narrowest range for 2014, moving just 44 points between its high and low. The S&P 500 traded in its seventh-smallest range this year. Volume was depressed by the upcoming Labor Day holiday in the United States, with some market participants away on vacation. While no major U.S. economic reports came out Wednesday, the data calender gets busier later this week, with the second estimate on second-quarter U.S. gross domestic product on Thursday and consumer-confidence numbers due Friday. The S&P 500 rose 0.10 of a point to 2,000.12. The Dow Jones industrial average rose 15.31, or 0.1 percent, to 17,122.01. The Dow is 16 points shy of its own record closing high set July 16. The Nasdaq composite fell 1.02 points to 4,569.62. The Nasdaq is still well below its dot-com era record.

Asian Indices are trading in green taking positive cues from the US markets. Shanghai Composite is trading with gains of 0.4 % with Hang Seng and KOSPI also trading with gains of 0.35% and 0.41% respectively. Nikkei open with red on profit-taking mood.

However, we expect Indian benchmark indices to remain quite volatile, on account of August F&O expiry. Further it is going to be another long weekend as markets are close on Friday. Further with hearing on Coal block allocation scheduled on September 1st, not many would be taking heavy exposures. We expect a positive opening for Indian equities today.