Markets to remain in somber mood with a soft start

The Indian markets suffered sharp correction in last session and traders took the excuse of rising crude prices to book profit at higher levels. Today, the start of the new week is likely to remain soft-to-cautious tailing the weakness in the global markets. However, some consolidation can be expected in the latter part of the trade with investors taking cues from Prime Minister Narendra Modi’s remark over weekend that “bitter medicine” might be needed to rescue the economy and restore its fiscal health. Finance Minister Arun Jaitley too has reiterated that fiscal disciplining is required to put the economy of the country back on tracks as India has witnessed two successive years of sub-five percent growth.  Today, the oil and gas stocks may keep buzzing on a report that the petroleum & natural gas ministry is working on a proposal to remove bottlenecks in the way of existing production-sharing contracts. PSU stocks too may see some action as the government may raise the dividend receipt target from state-run firms and link it with their ability to achieve capital expenditure plan. Power stocks too may show some action, as the industry body Assocham has said that the Centre needs to adopt measures to ensure that grid discipline is maintained and states over-drawing power from the transmission lines are penalized.

The US markets managed a close of modest green in the last session; there were some weak economic news that restricted any major gain in the market, while the Iraqi crisis kept looming large. Most of the Asian markets have made a soft start amid an escalation of violence in Iraq, which has pushed oil prices higher, lessening the equity risk appetite.

Back home, pressurized by rising crude oil prices overseas, distressed markets clobbered out of shape in Friday’s trade with benchmarks ending the session with a cut of around one and a half percentage point and frontline gauges tumbled below their crucial 7,550 (Nifty) and 25,250 (Sensex) levels. Selling was both brutal and broad based as none of the sectoral indices, barring software on BSE were spared. Those counter which featured in the list of worst performers, included realty, power and infrastructure. Earlier, markets made a positive start supported by good macro-economic data, released after market hours in last session and managed to hold the momentum till first half. India’s index of industrial production (IIP) rebounded to 13-month high of 3.4 percent in April after contracting for two consecutive months. At the same time, subdued prices of vegetables, cereals and dairy products pulled down the Consumer Price Index (CPI) to three-month low of 8.28 percent in May. Some support also came from meteorologists statement that it is too early to be worried about a below normal monsoon because monsoon showers could pick up in the coming weeks. However, reversal of trend which took place in second half of trade due to global concerns mainly weighed down sentiments. The markets cracked further in noon trades, after European counter made a sluggish opening, however the Asian markets ended mixed. Back home, domestic bourses continued to trade in the red after Indian rupee depreciated to its one month low against dollar. The rupee was trading at 59.69 per dollar at the time of equity markets closing versus its previous close of 59.25 per dollar. Meanwhile, selling in oil and gas counter too dampened the sentiments with stocks like ONGC, GAIL and Reliance edging lower as Crude oil hovered near nine-month highs early on Friday, as escalating civil war in Iraq hit risk appetite. Additionally, the Auto stocks, which gained massively in past few trading sessions, plunged during the late noon trades on the account of heavy profit booking with Tata Motors, Baja Auto and Maruti Suzuki all declining between 3-7%.Finally, the BSE Sensex was down by 348.04 points or 1.36% at 25228.17, while CNX Nifty settled at 7,542.10, down by 107.80 points or 1.41%.