Markets to get a cautious start; RBI credit policy eyed

The Indian markets ended marginally in red in last session despite some late hour recovery. Today, the start is likely to remain cautious and traders will be eyeing the Reserve Bank of India’s (RBI) bi-monthly monetary policy. RBI governor Raghuram Rajan had already cut the repo rate, or the key lending rate, to 7.75 percent, the first rate cut in his tenure. Though, there is build-up of expectations for yet another round of rate cut but RBI governor may not oblige so soon, but any kind of surprise can give markets the direction. There will be buzz in the payment banks licence seekers, as the big corporate like RIL, Aditya Birla Group, Airtel and Future Group have joined the race for payment bank licence with the end of the deadline for seeking payment bank and small finance banks licences. There will be some buzz in the IT sector too, with the development in US, where the Republican leadership has opposed US President Barack Obama's move to tax overseas earnings. There will be lots of important result announcements too, to keep the markets in action.

The US markets despite weak economic data surged in last session and ended at their almost day’s high. The gains were partly due to a notable increase by the price of crude oil, however, purchasing managers’ index fell to 53.5 in January from 55.1 in December, its lowest in one year. The Asian markets have mostly made a soft start weighed down by weak US economic data, though some indices in the region are marginally in green.

Back home, extending their downfall, Indian equity benchmarks ended the Monday’s trade slightly in the red as investors opted to remain on sidelines ahead of Reserve Bank of India (RBI) policy meeting on February 3. Though, Street widely expects Central bank to pause during the February 2015 monetary policy review, while maintaining a dovish tone, and resume cutting the repo rate by a further 50 basis points (bps) after the presentation of the Union Budget. Markets, after a negative opening, started moving southward but sudden spurt in noon deals helped key gauges to gain their positive terrain. Though, the recovery proved short-lived and markets ended the session with a cut of around one fifth of a percent. Overall sentiments remained dampened as investors remained worried over a huge shortfall in tax deducted at source (TDS) collections, the Central Board of Direct Taxes (CBDT) has asked the income tax department (I-T) to initiate special measures to achieve the collection target for this financial year. Selling got intensified after Growth in India’s factory activity slipped in January from December’s two-year high as new orders rose at a weaker rate despite factories keeping price increases to a minimum. The HSBC India Purchasing Managers’ Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, slid to three month low at 52.9 in January, down from 54.5 in the prior month. However, losses remained capped as some support came in from report that overseas investors pumped in a staggering Rs 33,688 crore in capital markets last month, making it the highest investment in six months owing to easing inflation and rate cut by Reserve Bank of India (RBI). On the global front, European markets made a positive start, while Asian markets ended mostly in the red after China’s factory sector shrank in January for the first time in more than two years. Meanwhile, metal stocks edged lower after downbeat Chinese factory sector data raised concerns about the world's second-largest economy. On the flip side, auto stocks remained on buyers’ radar on report that car sales in January are estimated to have risen almost 8% over the same month last year, despite an increase in prices on the back of 4-6% hike in excise duties from the month. Finally, the BSE Sensex declined by 60.68 points or 0.21%, to 29122.27, while the CNX Nifty lost 11.50 points or 0.13% to 8,797.40.