Nifty reclaims 8,200 on 7th Pay Commission approval; Brexit woes ease

Nifty reclaims 8,200 on 7th Pay Commission approval; Brexit woes ease

Benchmark indices ended near day’s high after the Cabinet today approved the recommendations of the 7th Pay Commission. Investors’ sentiments were further boosted due to recovery in global stocks after near term Brexit concerns eased.

The S&P BSE Sensex rose 216 points to end at 26,740 and the Nifty50 gained 76 points to close at 8,204. Among broader markets, BSE Midcap and Smallcap indices surged between 0.9%-1.2%, outperforming the benchmark indices.

ALSO READ: 7th Pay Commission: Cabinet approves big pay hike for government employees

Commenting on today's development, Motilal Oswal, CMD, Motilal Oswal Financial Services said "Just ahead of Monsoon, the 7th Pay commission will set the snowball impact in the economy. This is a well expected positive move, this will help achieve GDP growth target quicker. The Auto, consumer durables and FMCG sector would see much higher demand. The small concern could be that this may push inflation a bit higher”.

The Union Cabinet, led by Prime Minister Narendra Modi, on Wednesday approved the recommendations of the Seventh Pay Commission, a move which will boost consumption by putting extra disposable income in the hands of the central government’s 4.7 million employees.

The Cabinet has also approved the National Mineral Exploration Policy (NMEP) on Wednesday, which will pave the way for auction of 100 prospective mineral blocks, boosting India’s mining potential.

The Cabinet cleared the model Shops and Establishment Act that would allow cinema halls, restaurants, shops, banks and other such workplaces to be open 24X7. Read more.

Poll results may trigger knee-jerk reaction

Markets are gearing up for the outcome of Assembly elections in five states – Tamil Nadu, Kerala, West Bengal, Assam and Puducherry – scheduled for May 19. Though an unfavourable outcome for the Narendra Modi-led National Democratic Alliance (NDA) could trigger a knee-jerk reaction in the markets, analysts rule out a significant correction from the current levels.

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Factors like the progress of monsoon, corporate earnings, inflation trajectory and the Reserve Bank of India (RBI)’s stance on policy rates will be key in determining market direction over the next few weeks, they say.

Also Read: Kerala assembly elections: Will BJP make inroads this time?

“The markets could see a negative knee-jerk reaction and come under pressure in the short-run in case the NDA were to lose in Assam, the only state where it hopes to win. Even then, I do not expect the Nifty50 index to slip below 7,500 levels. The upside, too, seems to be capped around 7,900 levels. Besides the election, the ongoing results season and the progress of the monsoon over the next few weeks will have a bearing on market direction,” says U R Bhat, managing director,Dalton Capital Advisors.

Also Read: Assam assembly polls: Will Himanta Biswa Sarma make BJP's luck in the state?

For Tirthankar Patnaik, India strategist at Japan-based Mizuho Bank, the progress of monsoons over the next few weeks is a bigger concern than State election outcomes. He, too, expects the Nifty50 to find support at 7,500 levels in case of unfavourable election outcome and sees the upside capped at 8,000.Read more.