Markets to see some recovery with a positive start

The Indian markets lost their way completely in last session and suffered sharp profit booking in second half after surging to their record highs. Today, the start is likely to be in green taking cues from the global markets and bourses may cover some of their damages with Nifty reclaiming its 7600 levels in early trade. However, there will be some concern with deteriorating situation in Iraq and decline in rupee against the US dollar. It has been reported that global crude oil prices could soar up to $120 a barrel in the near-term, compounding worries for the Modi government by raising the oil bill anywhere between Rs 20,000 crore to Rs 25,000 crore in the budget for 2014-15. Meanwhile, Prime Minister has held a meeting with four Union ministers in charge of agriculture or food-related portfolios, to chart a strategy on the persistent rise in prices. Railways related stocks are likely to remain in jubilant mood, as the commerce and industry ministry has initiated the exercise to allow 100% FDI in several segments of railways, moving beyond its earlier plan to open select sectors. Power and banking sector stocks will react to a Moody’s report, which said that India’s power sector will continue to be a source of asset quality risk for banks if the poor financial profiles of state electricity board distribution companies (discoms) do not improve through further structural reforms.

The US markets ended higher in last session, reacting to the dovish statement of Federal Reserve’s monetary policy. Though, the Fed’s projections showed a slight uptick in expectations for rates at the end of next year. The Asian markets have made mostly a green start and some of the indices rose to their six years high after the dollar weakened after US Federal Reserve said that interest rates will remain low.

Back home, Wednesday’s trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 7,600 (Nifty) and 25,300 (Sensex) levels. Sentiments were weighed down as investors remained concerned over Iraqi turmoil. Earlier, markets made a positive start supported by report that foreign portfolio investors (FPIs) bought shares worth a net Rs 48.02 crore on June 17, 2014, as per provisional data from the stock exchanges. But, sentiments turned cautious and frontline gauges entered into red terrain after Brent crude surged above $113 per barrel on Wednesday as heavy fighting in Iraq shut the country’s biggest refinery and led to the withdrawal of staff by foreign oil firms, stoking worries about exports from the key oil producer. Investors were also focused on the Federal Reserve’s two-day monetary policy meeting that ends later in the day, with street expecting another $10 billion cut in the pace of monthly bond purchases to $35 billion. Sentiments also remained dampened amid reports that drought-like conditions have developed in large parts of the country as the monsoon deficit has widened to a worrying 49% since the start of the season on June 1. Though, some recovery witnessed in last leg of trade on the back of bargain hunting but this was not enough to bring markets into green. On the global front, European markets though traded in the green in early deals, the Asian counters ended mixed. Back home, depreciation in Indian rupee too dampened the sentiments. Meanwhile, public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC declined after international crude oil prices firmed up on concern over Iraq chaos.  On the other hand, stocks related to telecommunication sector, viz Bharti Airtel, Reliance Communication and Idea Cellular edged higher after Minister of Communications & Information Technology Ravi Shankar Prasad announced that his ministry had given in-principle approval for a nation-wide Mobile Network Portability (MNP) and its implementation would begin after the Telecom Regulatory Authority of India (TRAI) submits its recommendations. Finally, the BSE Sensex plunged by 274.94 points or 1.08%, to 25246.25, while the CNX Nifty declined by 73.50 points or 0.96%, to 7,558.20.