Positive Global Cues To Take Indices Northwards

Sentiments on global Canvas have turned extremely bullish and there are many reasons behind the same. While a fortnight back there was a scenario of when the questions were raised about the growth prospects and recovery in US markets, the data points today are indicating towards a smart recovery in the region. And as the air is cleared on the interest rates being kept low for a considerable time in US, there has been a bullish wave all over the globe with most of the equity indices globally witnessing an up –move.

Indian equity indices were one of the best performing markets yesterday and managed to close at an all time high level. What added to the conviction was record volume which usually remained on lower side. While the Sensex closed at 27346 (Up 248 points) and Nifty closed at 8169 (Up 79 points). More records were shattered today with total turnover crossing the Rs 10.40 lakh crore mark for the first time. Mid Cap and Small Cap Indices also witnessed gains of 0.66% and 0.34% respectively.

There are many positives that are guiding the Indian markets northwards. With BJP Government focusing on reforms there is lot of bullishness is seen on Dalal Street. We are of the opinion that the Insurance bill, Pension Bill and Banking Amendment Bills would be on the agenda of the Government. However the biggest push would come from implementation of GST And DTC. It is likely that with BJP Government winning most of the state elections, the roll out of GST would be easier.

While this has been the scenario on the domestic front, there were lots of positives on the global canvas also. US GDP growth for the third quarter of 2014 stood at 3.5 % as against the street estimates of 3.1%. As stated earlier, there were questions raised on whether the US growth recovery is for real?  The strong growth of 3.5%, answers each and everyone who raised a question mark. The S&P rose 0.6 % to a one-month high of 1994.63, closing within 1 % of its last record high level. The Dow rallied (221.17 points) 1.3 % to 17,195.48.

While the US markets moved northwards, the Asian equity indices also witnessed an up-move after the US economy grew faster than forecast and amid a report that Japan’s USD 1.2 trillion Government Pension Investment Fund will increase holdings of equities. We had been consistently stating that Japan would be the one putting more liquidity in markets.

Nikkei is trading with gains of 272 points (1.71%) followed by Hang Seng which is trading with gains of 0.83%. Shanghai Composite is also trading with gains of 0.38%. SGX Nifty is also trading in green with significant gains of 0.61%.

We expect the Indian equities to open gap up and then sustain the gains throughout the session. Apart from the positives we have mentioned earlier, the FIIs which usually bring liquidity to the markets are coming back to Indian markets. In October F&O series the FIIs have been net sellers for most of the trading sessions. However FIIs have turned net buyers in the past two trading sessions. Hence we expect the benchmark indices to open on a positive note.