Markets likely to see some recovery after two straight sessions of plunge

The Indian markets extending the plunge, witnessed cut of another over a percent in last session. The hangover of RBI’s indication of a pause in rate cuts and deficient monsoon forecast got another reason to ponder on with report of contraction in services sector. Today, the start is likely to be flat-to-positive and some value buying can be seen after two consecutive days of plunge with traders taking cues from the global markets, though the cautiousness is likely to persist as good economic data out of US has bolstered the view that the Federal Reserve may consider raising interest rates later this year. Also, a survey of RBI-sponsored Professional Forecasters on Macroeconomic Indicators has said that the economy is expected to grow at a rate of 7.8 percent in the current fiscal, a shade lower than earlier forecast of 7.9 percent. Power stocks will remain under pressure, as the Coal and Power Minister Piyush Goyal has said that there will be more pressure on the country’s thermal power generation plants if the monsoon rains are deficient this year. Though, he also said that the coal and power ministries were ready with a contingency plan to ensure that there are no power shortages in the country in case of a below normal monsoon. The oil & gas stocks too will be in action, as the oil ministry has said that India’s natural gas output is likely to rise by 50 percent to 146.87 million standard cubic meters per day by 2018-19 on account of higher production from ONGC fields.

The US markets made modest recovery in last session on optimism about Greece finally reaching an agreement with the international creditors. Traders also reacted positively to Commerce Department report showing US trade deficit narrowed by more than expected in the month of April. The Asian markets are trading mostly in green, though still some of the indices have made a soft start on concerns of faster euro-area inflation.

Back home, extending their southward journey for second day in a row, Indian equity benchmarks witnessed bloodbath on Wednesday with frontline gauges tumbling below their crucial 8,150 (Nifty) and 26,900 (Sensex) levels with a cut of over a percentage point. After a cautious start, the domestic bourses never looked in recovery mood and ended the trade near intraday lows as sentiments remained downbeat after the Reserve Bank of India (RBI) yesterday hinted that there may not be any more cuts in the near term, even as it cut the interest rate by 0.25 per cent for the third time this year. Selling was both brutal and wide-based as none of sectoral indices, barring information technology, on BSE could manage a green close. Counters which featured in the list of worst performers included realty, fast moving consumer goods and power. Sentiment of the market participants remained dampened after India’s services activities dropped for the first time in the span of thirteen month, largely due to decline in new order flows amid competitive pressure and natural disasters. Also, deficient monsoon forecast by the Met department, stoking fears of a drought, hit the domestic sentiment. On the global front, European counters traded in green in early deals, while the Asian markets ended mostly in the red. Back home, depreciation in Indian rupee too dampened the sentiments. Meanwhile, realty shares witnessed a sell-off on concerns of rising inventory levels while high debt levels of some companies also weighed on the sector. Stocks related to FMCG counter too edged lower on concerns that weak monsoons would impact the rural economy leading to lower volume growth. Finally, the BSE Sensex plunged by 351.18 points or 1.29% to 26837.20, while the CNX Nifty dropped by 101.35 points or 1.23% to 8,135.10.