Markets to remain in somber mood with a soft start

The Indian markets showed a volatile trade in last session and after reaching their historic high, lost momentum in second half, ending lower by about half a percent. Today, the start is likely to be soft-to-cautious tailing the weakness in the global markets and on concerns of growth outlook. Traders will be keeping a watch on major economic data of industrial production (IIP) and consumer inflation (CPI) to be announced after the market hours. While, the IIP probably rose in April to around 2 per cent from 0.5 per cent recorded in the month of March, the Consumer inflation has been averaging nearly 10 percent for the past two years and the street is expecting a marginal ease in May from 8.59 per cent recorded in April. There will be some action in mining stocks after a report released by Reserve Bank of India (RBI) stated that the mining sector experienced a marked fall in output growth rate in the 2000s, which is traceable to incremental domestic demand for crude oil being met from imports rather than domestic production. Meanwhile, the sugar stocks too may keep buzzing after a report that the Commerce Ministry is not looking at hiking import duty on sugar as it has not yet received any proposal in this regard.

The US markets ended lower in last session on renewed concerns about the outlook for the global economy after World Bank said that it now expects the global economy to grow by 2.8 percent in 2014 compared to its previous forecast for 3.2 percent growth. Most of the Asian markets have made a soft start retreating from their highest close in six years, led by the Japanese market after yen gained a third day amid speculation the Bank of Japan will refrain from expanding stimulus.

Back home, Snapping their four days gaining streak, Indian equity benchmarks ended the Wednesday’s session in the red, breaching their crucial 7,650 (Nifty) and 25,500 (Sensex) levels, as investors opted to book profit after the domestic bourses hit fresh all-time highs in intra-day trade. After a flat-to-positive start domestic gauges started building up momentum and scaled past their crucial 25,700 (Sensex) and 7,700 (Nifty) bastions in early deals. Sentiments remained up-beat on report that foreign portfolio investors (FPIs) bought shares worth Rs 682.26 crore net on June 10, 2014, as per provisional data from the stock exchanges. But, markets took U-turn from intraday high levels to enter into red terrain as investors turned cautious with monsoon concern looming large and the country expected to receive a below-normal monsoon rainfall of 93 percent this year, which could drag down GDP growth. Sentiments at Dalal Street also took a hit after the World Bank scaled down its estimate for India's economic growth this financial year to 5.5%, as compared to 6.2% in its January Report and highlighted the key risk to near-term forecast was weak monsoon because of El Nino. Investors also remained on sidelines ahead of release of the consumer price index (CPI) inflation data for May and the Index of Industrial Production (IIP) data for April due on June 12. Selling got intensified with European counters making a sluggish start, though, Asian markets ended the session mostly in the green terrain. Back home, losses remained capped on the back of 42.02% Y-o-Y fall in May trade deficit data. Encouragingly, exports clocked a 12.4% jump year-on-year to $27.99 billion in May as compared to $24.91 exports in the corresponding month previous year, its first double digit growth since September 2011. Imports in May stood at $ 39.23 billion as compared to $44.28 billion in the same month previous year. Meanwhile, FMCG shares lost ground on concerns that lower monsoon rains would hit agricultural output leading to lower rural incomes hurting volume growth. Finally, the BSE Sensex was down by 109.80 points or 0.43% at 25473.89, while CNX Nifty settled at 7,626.85, down by 29.55 points or 0.39%.