Markets to make a smart bounce back on good global cues

The Indian markets amid a choppy trade and major effort in second half, could manage only a flat close in last session. Today, the start is likely to see smart bounce back and Sensex may reclaim 27000 crucial psychological levels, taking cues from the recovery in the global markets after the US Fed said it was on course to raise interest rates, though not right away. On the domestic front traders will be getting some support with cabinet approving a constitutional amendment bill to rationalise state and central indirect taxes into a harmonised goods and services tax (GST). The bill is likely to be tabled in the ongoing winter session of Parliament that concludes on December 23. Also, the Asian Development Bank has said that India is on track to achieve projected 5.5 percent economic growth rate in 2014-15 as declining oil prices present a golden opportunity for many beneficial reforms. However, there will be some concern too on a survey report of SBI, which has said that the continued weakening of the rupee driven by external factors is likely to delay any interest rate cut by the Reserve Bank. There will be some buzz in the sugar stocks on report that sugar production upto December 15, 2014, stood at 42.25 lakh tonnes, about 13.5 lakh tonnes more than the production upto the corresponding period in the last sugar season of 28.77 lakh tonnes. 

The US markets made a sharp bounce back and rallied in last session, reacting positively to the Federal Reserve’s monetary policy statement. The Fed after its two days meeting left interest rates at near-zero levels and said it can be patient in beginning to normalize the stance of monetary policy. Asian markets have mostly made a green start taking cues from the US markets; however the Chinese market was trading in red after China’s yuan weakened against the dollar.

Back home, extending their southward journey to fifth straight session, Indian equity benchmarks ended the volatile day of trade in red terrain on Wednesday as investors remained on sidelines ahead of the outcome of a crucial US Federal Reserve meeting. Earlier, markets made an awful start with Nifty declining below its crucial 8,000 mark as sentiments remained dampened on reports that foreign institutional investors were net sellers in Indian equities worth Rs 1,247.24 crore on December 16, as per provisional stock exchange data. Decline in crude oil prices, depreciation in Indian rupee, weak macro-economic parameters and global growth concerns also dampened sentiments of the market participants. However, markets recouped most of their losses and turned positive for a brief period in noon deals on reports that LIC, a government-run entity, brought into domestic share markets to arrest the freefall of the markets. The rupee also retreated from 13-month lows after the central bank stepped up interventions, while bonds also recovered despite concerns over whether foreign funds will stick with India. Global cues remained weak as European counters made a somber start due to relentless drop in crude oil prices and Russia’s brewing financial crisis, although Asian equity indices ended mostly higher. Back home, sentiments remained dampened on reports that credit flow to the commercial sector has come down to 11.1 percent in October from 14.2 percent in April on account of weak demand for banking funds. Meanwhile, Pharma shares remained under pressure on fears that a crash of the Russian currency would hurt their exports. A weaker currency raises the cost of imports hurting further demand. Moreover, stocks related to auto space edged lower on reports suggesting that government would not extend excise duty beyond December 31, 2014. Besides, public sector oil marketing companies (OMCs) ended in red with the government denying it had any plans to withdraw the recent hike in excise duty on petrol and diesel. Finally, the BSE Sensex declined by 71.31 points or 0.27%, to 26710.13, while the CNX Nifty lost 37.80 points or 0.47% to 8,029.80.