Markets to get a cautious start, may consolidate further

The Indian markets continued their bearish trend and ended in red once again in last session after a choppy trade with crude prices surging on unabated conflict in Iraq. Today, the start is likely to remain cautious with United States announcing to send upto 300 military advisers to help Iraq fight insurgents of the Islamic State of Iraq and the Levant (ISIS). The United States will also lead a diplomatic effort to work with countries in the region to bring stability to Iraq. On the domestic front, the selling report of funds is likely to weigh on the traders sentiments. Also, a weather office data has showed that rainfall was 45 per cent below average for the week ended June 18, compared with 48 percent below average the previous week. Though, the monsoon has covered half of India’s landmass four days behind the usual schedule. There will be some comfort with Petroleum Minister Dharmendra Pradhan’s statement that fuel supplies will not be impacted by the conflict in Iraq, nation’s second largest crude oil supplier. He has said that crude supplies to India from Iraq come from the Basra oilfields which are situated well away from the conflict zone in the north-eastern part of Iraq and loading of ships continues normally. Also, a survey has stated that India Inc believes the country's economy is likely to grow 5-6 per cent in the current financial year. There will be some buzz in banking and realty sector, as HDFC chairman Deepak Parekh has called for permitting banks to extend loans for purchase of land and recognition of loans up to Rs 40 lakh as priority sector.

The US markets made almost a flat closing and despite a choppy trade the S&P 500 managed to scale another new record closing high. Traders largely shrugged off a batch of upbeat US economic data. The Asian markets have made a mixed start with some of the indices paring gains with the decline in materials and technology stock following the deteriorating situation in Iraq.

Back home, extending their southward journey for second day in a row, Indian equity benchmarks ended the volatile day of trade slightly in the red on Thursday. After a positive start, domestic bourses lost momentum in absence of any positive trigger and entered into the red terrain as sentiments turned cautious after Brent crude surged above $114.50 per barrel on Thursday 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. However, losses remained capped as some amount of recovery witnessed in last leg of trade as investors opted to pile up positions in beaten down but fundamentally strong stocks. Report suggesting that foreign portfolio investors (FPIs) bought shares worth net Rs 366.18 crore on June 18, 2014 too aided the sentiments. Meanwhile, to encourage more promoters to tap the IPO market, SEBI has relaxed the minimum dilution criteria. Companies can now sell a minimum 25% stake or Rs 400 crore, whichever is more, in public offerings. Positive opening in European markets too supported the sentiments, though, Asian markets ended mixed on Thursday. Back home, market’s fall was led by Oil explorers, which slumped on worries of high gas pricing, which might be allowed only for incremental output. The stocks were beaten blue after reports suggested of petroleum ministry, in a proposal, allowing higher gas price as per the Rangarajan formula only for incremental production over and above the current levels, as an alternative to applying the formula unconditionally from July 1. This was followed by stocks from Public Sector Undertaking and Infrastructure counters which remained among the worst hit of the session. In the ferocious selling pressure, broader indices too ended with cut of around half a percent. Additionally, railways related stocks edged higher, 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. Finally, the BSE Sensex declined by 44.45 points or 0.18%, to 25201.80, while the CNX Nifty lost 17.50 points or 0.23%, to 7,540.70.