Markets to remain in somber mood on weak global cues

The Indian markets suffered sharp profit booking in last session; today the start is likely to be somber tailing the weakness in the global cues. Traders will be concerned with India's current account deficit (CAD) widening sharply to $10.1 billion in the second quarter of FY15, due to high gold imports. Also, the two global ratings agency Moody’s and Fitch have pitched for bold reforms, saying that the government needs to effectively implement its macro-economic and structural reform agenda for growing between 6-7 percent in coming years. However, Fitch Ratings has said that India’s economic growth rate will accelerate to 6.5 percent in 2015 and further to 6.8 percent in 2016 on account of reforms. While, as per Moody’s Investors Service Report, the outlook for India's rating would improve if fiscal, inflation and infrastructure metrics get better. There will be buzz in power, steel and cement stocks, as the coal ministry is looking at a floor price of not less than Rs 150 per tonne for auctioning coal mines to steel, cement as well as captive power plants and a reserve price of Rs 100 a tonne for mines to be allotted to government companies and power stations through the reverse auction method. The pharma sector stocks too are likely to be in action after the fair trade regulator Competition Commission of India (CCI) gave its nod to the merger of Sun Pharmaceutical Industries and Ranbaxy Laboratories with certain riders.

The US markets turned lower in last session led by steep drop in oil prices, which weighed heavily on energy stocks. Some weak economic data overseas too contributed to the weakness on the street. The Asian markets have made mostly a soft start and some indices in the region are lower by over a percent following the US markets, while the Japanese market was weighed down by stronger yen. 

Back home, Indian markets that have been witnessing choppiness for last couple of days, went through correction on the very starting day of the data heavy week on Monday. Though, the start was on a flat note with a modest negative bias and markets inched higher in green in very early trade but it was for a very short period, there after profit booking started and kept on dragging the markets lower. In the second half selling aggravated and dragged the markets to their lows with both the benchmarks suffering triple digit cut. The global cues remained mostly week, although the Asian markets made a mixed closing, while the European markets made a soft start with major indices turning lower after a four week rally. Back home, gloom widened on the Dalal Street with markets suffering cut of over a percent and traders taking opportunity to book profit after the recent surge. The weakness in domestic currency against the dollar too weighed on the sentiments. Traders even ignored international credit ratings agency Moody's statement that India's Baa3 government bond rating balances the strong growth potential of its large and diverse economy against high fiscal deficits, recurrent inflationary pressures, as well as regulatory and infrastructure constraints on competitiveness. According to Moody's, India's high economic strength is a key source of sovereign credit support. The IT sector remained under pressure since beginning due to Infosys which lost around five percent in trades after four of the founders of the company sold around 32.6 million shares in multiple block deals to raise about $1.1 billion at a fixed price of Rs 1,988 each, a 4 per cent discount to Friday's close. The shares were being offered by the company’s promoters N R Narayana Murthy, Nandan Nilekani, K Dinesh and S D Shibulal, along with their families. The deal amounts to 2.8% of the outstanding equity. The metals stocks too were bit under whether, reacting to weak Chinese trade data. China's exports rose 4.7 per cent in November, well below expectations and added to concerns that it could be facing a sharper slowdown. Finally, the BSE Sensex plunged by 338.70 points or 1.19%, to 28119.40, while the CNX Nifty dropped 100.05 points or 1.17% to 8,438.25.