The Indian equity market continued its upward momentum for the second consecutive month in June owing to positive local and global cues. CNX Nifty’s and S&P BSE Sensex’s gain in June at 5.28% and 4.94%, respectively, was lower than 8% gain each in May. In the beginning of the month, the market rose on hopes of some positive announcements by the Reserve Bank of India (RBI) in its bi-monthly monetary policy review on June 3. However, the RBI left the key repo rate unchanged at 8%. Sentiments were boosted further after data showed that India's HSBC Manufacturing Purchasing Managers' Index rose to a three-month high of 51.4 in May from 51.3 in April. Robust buying by foreign institutional investors (FIIs) and hopes of the government announcing several measures in its budget on July 10 also augured well for the equity market.
Positive comments from the US Federal Reserve, in its June meeting, of continuing lower rates than expected in the long run and expansion of manufacturing activity in China added to the market gains.
The rise was, however, capped due to intermittent weakness in the rupee and concerns over rising oil prices amid ongoing tensions in Iraq. Rise in WPI-based inflation to a five-month high of 6.01% in May, concerns that a weak monsoon could accelerate inflation and sporadic profit booking during the month too resulted in market fall.
All S&P BSE sectoral indices ended higher in June except the S&P BSE FMCG index. S&P BSE Consumer Durables index was the topmost gainer, up 14.99% on value buying and hopes of economic recovery following speedy policy reforms from the new government. The S&P BSE IT index rose 10.53% as a weak rupee benefited the exports-oriented sector. The S&P BSE Auto index climbed 5.21% after Finance Minister Arun Jaitley announced six-month extension of the excise duty cut. The S&P BSE FMCG was the only laggard, down 2.74% on profit booking.
The new government will table its budget on 10 July, 2014. The policy changes announced in the budget and the progress of the monsoons would guide the market. Corporates’ Q1FY15 results to be announced this month too would have a bearing on market movement. Further, the market will take its cue from domestic macroeconomic data and global developments. We expect the CNX Nifty to end the month around 7,650-7,850 (S&P BSE Sensex at 25,600-26,250).