Markets to make a flat but positive start on sanguine global cues

The Indian markets after a choppy trade and despite some late hour recovery ended modestly in red in last session. Though, the broader markets witnessed good upmove, there was some profit booking in the bluechip stocks that kept the markets under pressure. Today, the start is likely to be in green tailing the positive global sentiments. Traders will be getting some support with an UN report, saying that Indian economy is likely to clock 8.1 percent growth in the current financial year, spurred by strong consumer spending amid low inflation, infrastructure projects and government's reform measures. Finance Minister Arun Jaitley too has said that the economy was in a recovery mode with inflation and fiscal deficit under control and despondency giving way to a positive environment. Meanwhile, with the inflation dropping to a new low in April, industry bodies have once again demand for a rate cut, saying it provides ample space for the RBI to slash the key policy rate to fuel investments and propel growth. There will be some pressure on the banking stocks with RBI governor Raghuram Rajan’s statement that there was no danger of any financial crisis but it may be early to declare that the worst was over on the non-performing asset ( NPA) front with rising bad loans at some banks.

The US markets rallied in last session with S&P 500 surging to a new record closing high, while the Dow reached its best levels since early March. Traders took cues from the drop in bond yields. Report of drop in US producer prices reinforced the view that the Fed will delay its plan of increasing interest rates. The Asian markets after mostly a soft start, were showing some recovery with some of the indices heading for their first weekly advance in three weeks.

Back home, Thursday proved another very volatile day of trade for the Indian markets like the previous one, however the fate reversed with benchmarks making a soft closing and losing some of their last session’s gains. The trading sentiment was impacted by the weakness in other global markets and trading participants largely overlooked the domestic developments. Rising bond yields in the US and Europe has kept the markets across the globe on tenterhooks for last couple of days. On the domestic front the IT pack came under pressure after the rupee firmed up on sustained selling of greenback by banks and exporters due to weakness of dollar in the overseas market. The Asian markets made mostly a lower start and ended mixed, while the European markets were showing choppiness in early deals. Back home, the Indian markets though made a positive start, extending their gains of last session but the upmove was only momentary and afterwards the major benchmarks kept struggling for most part of the day and were unable to enter the green even once, all the attempts of recovery were sold out on profit taking. Traders took heart from the approval for various reform proposals on the last day of the Budget Session of the parliament and moved higher in opening deals but overlooked the continued decline in WPI inflation to record low of -2.65% in April as compared to -2.33% witnessed in March, their sixth straight fall, mainly on the back of plunging oil prices. In the final hours there was some recovery with traders expecting some policy rates announcements by the RBI. Though, governor Rajan talked about the board suggestion of an IT subsidiary to look after cyber security and legislative changes needed to take financial sector forward. In non sectoral gauges fertilizer showed a mixed trend impacted by the government’s approval of the new urea policy which aims to maximize indigenous urea production and promote energy efficiency in units to reduce the subsidy burden on the government. The policy is expected to raise urea production by 20 million tonnes and reduce imports. Finally, the BSE Sensex declined by 45.04 points or 0.17% to 27206.06, while the CNX Nifty lost 11.25 points or 0.14% to 8,224.20.