Markets to get a flat start; may move higher in latter trade on supportive global cues

The Indian markets after a choppy trade made a flat closing in last session. Some good macro data too were unable to boost the sentiments and traders opted to book profit at every upmove. Today, the start is likely to be flat but markets may gain strength in latter part of the trade taking cues from the global markets. Traders will be getting some support with the Reserve Bank of India deputy governor H. R. Khan’s statement that the central bank is reasonably comfortable with the current account deficit because of lower oil prices. Meanwhile, in its effort to boost confidence among taxpayers, the government has set up a High Level Committee (HLC) to interact with trade and industry and identify areas where clarity on tax laws is needed. The realty stocks will keep buzzing after the relaxed FDI policy for this sector by easing exit norms and reducing built-up area and capital needs, in order to help attract foreign funds in construction of townships, hospitals and hotels. The fertilizer stocks too may see some action on reports that Fertilizer Ministry will soon move a Cabinet note for continuation of subsidy to three closed naptha-based urea plants to maintain domestic production of urea in the country. Oil & gas stocks are likely to see some action as the Oil Minister Dharmendra Pradhan has batted for an umbrella statutory body on oil & gas safety norms.

The US markets made a positive close extending their gains for the second day in a row and lifted the Dow and the S&P 500 to new record closing highs. Traders were encouraged by the Fed’s Beige Book stating that economic activity continued to expand in October and November. The Asian markets have made a green start led by the Japanese market which was heading towards its highest level since December 2007 as dollar surged against yen.

Back home, volatility lingered for yet another session on Wednesday and the Indian markets kept moving in and out of the red zone throughout the day despite good global lead. Traders amid the disappointment of RBI keeping its policy rates unchanged, even overlooked the report that activity in India’s services sector expanded at its fastest pace in five months, mainly driven by new order flows. The HSBC Services Purchasing Managers’ Index (PMI) rose to 52.6 in the month of November, compared with 50 in October. The reading in November, however was below the series average and sentiment remained subdued, especially with the decline seen in hiring. The global markets though showed mostly a positive trend, while the European markets too made a positive start, as investors weighed the prospects for expanded stimulus from the European Central Bank. Back home, it was a day for the broader markets and they remained buzzing throughout the day, outperforming the benchmarks with quiet a margin. Markets in early deals showed signs of recovery, as buying emerged from domestic as well as foreign investors on positive global cues. But in the latter trade there was intermittent selling that kept dragging markets lower, countering the buying attempt. There was some upmove in the second half supported by a report that the government has set up an Inter-Ministerial Committee to fast-track investment proposals from US in India. The Committee is meant to identify bottlenecks faced by the US investors in the implementation of their investment proposals and address them in consultation with all other agencies and state governments concerned. Back on the street, it was the drag in the tech and IT stocks that led a flat closing of the markets, otherwise the rate sensitives like auto, reality and banks surged on value buying and on hopes of a big rate cut by the RBI early next year. Realty also got the advantage of government’s announcement of easing foreign direct investment rules for the construction sector. Meanwhile, the Reserve Bank of India kept key interest rates unchanged on Tuesday but hinted at a possible cut early next year if inflation remained subdued and the government controlled the fiscal deficit. There is wide expectations that though RBI may not have cut rates this time it may go big while cutting rate in March-April next year and may even reduce rates by 50 bps at one stroke. IT stocks were under pressure due to sharp depreciation of major global currencies against the dollar. In non sectoral gauge some upmove was seen in companies related to insurance business on reports that the Insurance Bill might be passed in the current session of Parliament, as the main opposition Congress may support the bill. Max India surged by 7%, while Reliance Capital gained around 4%. Finally, the BSE Sensex ended tad lower by 1.30 points, to 28442.71, while the CNX Nifty added 12.95 points or 0.15% to 8,537.65.