Markets to get a cautious start tailing soft global cues

The Indian markets despite some late hour profit booking managed to snap last session with gains of over half a percent, traders remained hopeful of government taking policy actions in coming days. Today, the start is likely to be cautious and some pressure can appear taking cues from the global markets. Traders will be concerned with the Reserve Bank of India’s (RBI) Financial Stability Report (FSR), stating that risks to India’s banking system continue to remain at elevated levels on concerns of further deterioration in the asset quality. The central bank has warned that banks’ bad loans will worsen if economy falters further. However, there will be some solace for the India Inc, as the Union Cabinet cleared ordinance on Land Acqusition Act including removal of consent clause for acquiring land for five areas of industrial corridors, PPP projects, rural infrastructure, affordable housing and defence. Also, Finance Minister Arun Jaitley has again pitched for a rate cut by the RBI, saying that the credit offtake is slow, infrastructure creation becomes slower, and the manufacturers find it difficult to afford costly capital, because it is going to add to each one of their costs. There will be some buzz in the oil companies too, on report that India’s fuel consumption has risen by 4.9 percent in November buoyed by rising diesel sales.

The US markets ended mostly flat in last session, trade remained choppy as many traders stayed on the sidelines amid a lack of major US economic data on the day. Though, traders largely shrugged off concerns about the political situation in Greece. The Asian markets have made a soft start and some of the major indices are trading lower by over half a percent weighed down by commodity stocks, as the gold and crude oil slumped.

Back home, Monday’s session turned out to be a fabulous day of trade for the Indian equity markets, where frontline gauges garnered gains of over half a percent. Barometer gauges, after a gap-up opening, traded in tight band throughout the session with frontline gauges ending near their crucial 27,400 (Sensex) and 8,250 (Nifty). Overall sentiments remained up-beat on report that overseas investors poured in $2 billion in the Indian capital markets this month so far, taking total inflows to $42 billion since January this year. Improvement in the macroeconomic situation and investor sentiment on account of a series of steps taken by the new government helped attract higher FDI. Some support also came from reports that the Narendra Modi government is set to unleash several big-ticket announcements over the next few weeks, starting with changes in the land acquisition law through an ordinance. Further, Finance Minister Arun Jaitley’s comment that the economy is expected to grow ‘much better’ in 2015-16 as compared with the current financial year also boosted sentiment. He pointed that while Indian economy is expected to grow by 5.3 percent in the September quarter from a year earlier, it would grow 5.5% in the current financial year that ends on March 31. On the global front, European markets traded mostly in the red in early deals, however, Asian markets ended mostly in the green, buoyed by share gains in the US and new bank rules in China that will help spur lending. Back home, sentiments also got some boost on reports that foreign institutional investors were net buyers in Indian equities to the tune of Rs 40 crore on December 26, 2014. Meanwhile, metal and mining stocks remained on buyers’ radar on reports of China’s central bank adjusting deposits calculation rules. Stocks related to infrastructure too edged higher on reports that the government plans to exclude 13 central laws to clear several infrastructure and public private partnership projects. Additionally, software and technology counters traded jubilantly as rupee edged lower against the dollar. Finally, the BSE Sensex surged by 153.95 points or 0.57%, to 27395.73, while the CNX Nifty gained 45.60 points or 0.56% to 8,246.30.