Markets to make a cautious start after big gains of last session

The Indian markets rallied in last session, bouncing back from their last two sessions decline on value buying. Today, the start is likely to be cautious as IMF chief Christine Lagarde has said that a possible interest rate hike by the US Federal Reserve could pose risks to market stability in emerging economies, including India, even if it is well managed by central banks. However, there will be some buzz in the market with government approving the release of Rs 33,000 crore in tranches to states and Union Territories as CST compensation. As part of the roll-out of proposed Goods and Services Tax (GST) regime, the CST is being phased out and has been reduced to 2 per cent, from the earlier 4 percent. Also there will be some support with a Crisil Research study showing that India’s household spending will rise by Rs 1.4 trillion or 2 percent in the next fiscal on the back of low fuel prices, benign food inflation and a rising income growth. The metals and mining stocks are likely to remain in action, as the government is re-examining the bids for nine coal blocks, including those where Balco emerged the top bidders, and a final decision on their fate would be taken by this weekend. Also, the union ministry of environment and forest revoked the suspension of environmental clearances of mines in the coastal state of Goa, paving way for Iron ore mining.

The US markets made a mixed closing in last session and though the major averages bounced well off their worst levels of the day, the trading remained subdued ahead of the announcement of the Federal Reserve’s latest monetary policy decision on Wednesday. The Asian markets have made mostly a soft start and the Japanese market was marginally in red despite the nation’s exports rising more than predicted in February compared with the previous year, while imports unexpectedly declined.

Back home, snapping two days losing streak, Indian equity benchmarks staged an enthusiastic performance on Tuesday, by rallying over a percentage point and breaking lots of psychological levels in their northward journey on sustained buying activities by funds and retail investors on the back of positive global cues. Earlier, markets made a gap-up opening tracking firm global cues on hopes weak economic data would prompt the US Federal Reserve to leave options open on the timing of an interest rate hike. But, markets come off day’s high during late noon trades owing to profit taking in technology stocks amid strengthening of Indian rupee. Meanwhile, investors turned cautious ahead of the two-day Federal Open Market Committee (FOMC) monetary policy review. Barometer gauges showcased a smart recovery from intraday low levels in last leg of trade as sentiments turned optimistic after Finance Minister Arun Jaitley told lawmakers on Tuesday that India’s current account deficit will ‘hopefully’ be less than 1% of gross domestic product (GDP) in the fiscal year that begins in April. Some support also came with IMF chief Christine Lagarde’s statement that Indian economy is poised to overtake the combined GDP of Japan and Germany in the next four years on the back of recent policy reforms and improved business confidence in the country. On the global front, European markets reversed their initial gains to trade mostly in the red, while the Asian markets ended the session mostly in the green. Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Frontline indices managed to settle near intraday high levels with Sensex surpassing its crucial 28,700 bastion, while Nifty ended near its crucial 8,700 mark. Recovery in Indian rupee too supported the sentiments. The rupee firmed up against the US dollar and was trading at 62.73 at the time of equity markets closing as compared to Monday’s close of 62.81, tracking gains in domestic equity markets. Finally, the BSE Sensex surged by 298.67 points or 1.05% to 28736.38, while the CNX Nifty soared by 90.15 points or 1.04% to 8,723.30.