Markets likely to get optimistic start on Monday

Indian indices - the Nifty 50 and the 30-stock Sensex snapped a five-day losing streak and ended higher on Friday on account of value buying. Today, markets are likely to get optimistic start tracking gains in global markets and foreign fund inflows in the domestic markets. Foreign investors injected over Rs 33,600 crore into Indian equities so far this month on the expectation of continued policy reforms, sustained economic growth and a better-than-expected earnings season. Traders will be taking encouragement as Piyush Goyal, the union minister for commerce and industry, said that the hike in capital gains taxes is unlikely to slow down capital market activity. He separately also said that removal of angel tax, which was introduced in 2012 by the UPA government, for all classes of investors will help startups attract investments. Some support will come as S&P Global Ratings said it does not expect recent general election results to cast a shadow on the prospects for fiscal improvements in India, even as the US credit rating agency suggested that it may further raise the country’s ratings if fiscal deficits narrow meaningfully. S&P had raised India’s sovereign rating outlook to positive from stable in May this year. Some optimism will come as Fitch Ratings said India's post-election budget confirms that the new administration remains committed to reducing the fiscal deficit for FY25 and FY26, despite demands of the coalition government. It added the sustained focus on supporting economic growth through high public capex also points to continuity in key areas. Traders may take note of the NITI Aayog’s statement that India needs to grow at a sustained pace of 7-10 per cent for 20-30 years to escape the middle-income trap and become a developed nation with a per capita income of $18,000 per annum and the size of a $30 trillion economy by 2047 when the country celebrates its centenary anniversary of independence. Besides, latest data by the Reserve Bank of India (RBI) showed that India’s foreign exchange reserves rose by $4 billion to hit a new all-time high of $670.86 billion in the week ended July 19. Sugar sector stocks will be in focus as Union Food Secretary Sanjeev Chopra said the government is likely to take a decision on increasing the minimum selling price (MSP) of sugar within the next few days. MSP of sugar has remained unchanged at Rs 31 per kg since 2019, despite annual hikes in the fair and remunerative price (FRP) paid to sugarcane farmers. There will be some reaction in stocks related to tobacco sector as the Commerce and Industry Ministry is working on a proposal to further tighten the foreign direct investment norms in the tobacco sector to check promotional activities and curb smuggling in the segment as firms are trying to circumvent norms. At present, foreign direct investment (FDI) is prohibited in the manufacturing of cigars, cheroots, cigarillos and cigarettes of tobacco or its substitutes.

The US markets ended higher on Friday after GDP numbers came higher than expectation plus buoyed by fresh US inflation data. Asian markets are trading mostly in green on Monday ahead of a week packed with earnings and a trio of central bank meetings that could see the United States and UK open the door to easing, while Japan might lift borrowing costs in a step toward normality.

Back home, bulls made a strong comeback on Friday as traders opted to buy beaten down but fundamentally strong stocks after five consecutive sessions of drubbing. After making a positive start, key gauges continued to rally throughout to end the day at new record closing highs. This surge was fuelled by improved sentiment following robust performances in Telecom, Metal and TECK stocks, as well as significant rollovers to the August series. Broader indices also reflected this strength, showing substantial gains. The upbeat tone was evident from the start, with substantial buying in heavyweights across various sectors further driving the momentum. Traders took encouragement with Reserve Bank of India Deputy Governor M Rajeshwar Rao’s statement that Indian financial system looks stronger than in the past and the country's economy is an outlier even as strong headwinds globally. Investors continued keeping close eye on earning reactions. Some support also came with DIPAM Secretary Tuhin Kanta Pandey's statement that the focus of the government will be to improve the performance of CPSEs with a view to maximise wealth creation and not to push disinvestment just to meet targets. He said the market capitalisation of 77 listed public sector entities, which include banks, insurance companies and Central Public Sector Enterprises (CPSEs), has jumped 4 times in the last three years to about Rs 73 lakh crore. Markets experienced a significant rally as the day progressed and ended with strong gains, taking support from private report stating that the FMCG sector is expected to register 6.1 per cent volume growth in the rural market this fiscal. This volume growth in the rural market stood at 4.4 per cent a year ago, while the urban volume growth is likely to remain flat at 4.2 per cent. Sentiments remained upbeat, as the government eased certain norms for licence holders of the Export Promotion Capital Goods scheme as part of its ease of doing business efforts. The EPCG scheme facilitates import of capital goods for producing quality goods and services and enhances India's manufacturing competitiveness. It allows import of capital goods for pre-production, production and post-production at zero customs duty. Finally, the BSE Sensex rose 1292.92 points or 1.62% to 81,332.72, and the CNX Nifty was up by 428.75 points or 1.76% points to 24,834.85.