Markets to see some recovery on supportive global cues

The Indian markets weakened further in last session, disappointed by the central bank keeping its key policy rates unchanged in its monetary policy review. Today, the start is likely to be flat-to-green and some recovery can be expected on supportive global cues, however the rate sensitive are likely to remain under pressure. Meanwhile, India Inc will be eyeing the development in Goods and Services Tax (GST) rollout, which has missed several deadlines because of lack of consensus among states, now the Finance Ministry has proposed to compensate states for three years for losses they may incur on account of switching to a nationwide GST regime, as against a demand for a five-year compensation. Also, the Union Cabinet has cleared four bills that are likely to be introduced in Parliament during the current session, including the amendments to the Companies Act which will make life simpler for the corporate sector. There will be some buzz in the power sector stocks, as the government has said that efforts are under way to rationalise coal linkages with power plants to save an estimated Rs 6,000 crore a year to save on transportation of the fuel. There will be some buzz in the markets with BSE revising the permissible daily trading limit for shares of Jet Airways and 19 other companies, as part of a surveillance action.

The US markets bounced back and ended with good gains in last session with the Dow reaching a new record closing high. A stronger than expected jump in construction spending in the month of October and good car sales data bolstered the market sentiments. The Asian markets have made mostly a positive start with some of the indices gaining over a percent, led by the Japanese market which was surging towards a seven-year high, after the yen weakened.

Back home, markets continued their somber mood for yet another day on Tuesday with benchmarks witnessing cut of around half a percent. The trade remained choppy for the day and traders in a cautious mood from the beginning ahead of the RBI’s policy announcement scheduled for the day. Initially there was impact of weak trend in the global markets and traders remained on sidelines, largely overlooking the report that growth of eight core industries rose to 6.3 percent in October on the back of a strong production of coal, crude oil and petroleum products putting the cumulative growth during April-October, 2014-15 at 4.3 percent. The eight core sectors have a combined weight of about 38 percent in the Index of Industrial Production, indicating a better show of the IIP later in the month. The global crude prices have risen in overnight trade and dampened the sentiments of the traders. In the global markets, the Asian indices mostly made a positive close, while the European markets made a positive start and major indices rose to two months high on hopes of stimulus measures and as energy shares rebounded. Back home, traders expecting some surprise from the RBI’s fifth Bi-Monthly Monetary Policy review of 2014-15, suffered sudden slump in a knee jerk reaction to central bank's decision of keeping the policy rates unchanged, while stating that change in monetary policy stance at the current juncture is premature. RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent; similarly the cash reserve ratio (CRR) of scheduled banks was kept unchanged at 4.0 per cent of net demand and time liabilities (NDTL). Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate will stand at 9.0 per cent. All the rate sensitives including banks, auto and consumer durables were disappointed, however there was a quick recovery on RBI’s hint of lowering policy rate early next year if current trend in fiscal developments and disinflationary pressure continue. But again profit booking dragged the markets lower and markets found it difficult to recover, there were some valiant efforts in the second half but were sold off with traders remaining worried about global growth and disappointed of a long delay in rate cuts. Finally, the BSE Sensex plunged by 115.61 points or 0.40%, to 28444.01, while the CNX Nifty declined by 31.20 points or 0.36% to 8,524.70.