Another Gap-Up Opening Expected For Indian Equities

While it is an end of fiscal year 2014 and also is an auspicious day of Gudi Padwa (Marathi New Year) markets are already in a cheerful mood.  After breaking all the high time levels in the preceding week the Indian equity indices are all set for another strong up-move. In the preceding week the Sensex and Nifty made a all time new high every day as the indices inched northwards. On Friday (March 28, 2014) while the Sensex closed at 22339 (Up 126 Points) the Nifty closed at 6696 (Up 54 points). The Nifty first time

Today there are many reasons for the indices to make a strong opening. First and the foremost is related to the global markets with the US markets providing a good up-move (After witnessing some amount of decline earlier in the week) and even the Asian markets are trading in green with significant gains. The Dow closed at 16323 (Up 58 points) the S&P Closed at 1857 (Up 8.50 points). The basic reason behind the up-move was the announcement of Consumer spending data which increased by 0.3%.

The Asian markets are also showing a good amount of strength with Nikkei trading at 14767 (up 71 points). The other indices like Straits Times and Hang Seng are also trading with significant gains of around 0.40%. Even the Shanghai Composite is trading in green with some gains ahead of the announcement of PMI Data. As for the announcement of macro Data in china, an official purchasing managers’ index of Chinese manufacturing due tomorrow is estimated to drop to 50.1 for March from 50.2 in February, a Bloomberg survey of economist’s shows. HSBC Holdings Plc and Markit Economics also release the final reading on their China manufacturing PMI for March tomorrow, after preliminary numbers signaled a third month of contraction in the sector

While this is a data on the global front, on the domestic front there are many factors that would help the Indices to enter the new orbit. In the month of March Indian markets have witnessed significant inflow of FIIs. And we feel the FII inflows are likely to sustain going ahead in the next fiscal also.

There is sort of hope rally ahead of the few important events lined up in the month of April. First and the foremost would be the announcement of monetary policy on April 1st, 2014. Most on the street are expecting Dr. Rajan to maintain a status quo. We also second the though as there has been good amount of respite on the inflation front.

In addition to policy announcement there is possibility of some clarity on the baking license front. We feel this would keep the banking stock in limelight today.

Apart from that the sharp appreciation in INR against the USD is also another positive aspect for the markets. Though the currency Markets are closed today the INR in the past week surged to close below the Rs 60 per USD mark.

The Indian government has announced its borrowing plan for the next fiscal and plans to borrow Rs 3.86 lakh crore in the H1FY15. This is around 61% borrowing in the first half of FY15. This may upset some money market players when the markets open tomorrow.

As about expected opening of Indian equities, SGX Nifty is trading with gains of 28 points (trading at 6767). Hence with so many positives on the cards, we expect another Gap-up opening for the Indices. We expect the positivity to remain throughout the session as the fund managers would try to keep the indices higher to maintain the bonus they get on performance.  Hence expect another new high for the Indian equities today.