Markets to make a cautious start; may see some recovery in latter trade

The Indian markets tailing the global markets, suffered sharp cuts in last session, although the benchmarks recovered a lot from the lows of the day but still ended with lower by over half a percent. Today, the start is likely to be cautious, as the industry and government has warned that with Greece witnessing a full- blown economic crisis, India's software and engineering exports may take a hit and the country may also face larger capital outflows due to a weaker euro. Some respite will come with a report that India is one of the fastest growing FDI sources for the United States with investors from the country more interested in US' aerospace and textile sectors, among others. Also, NITI Aayog Vice Chairman Arvind Panagariya has said that India’s growth rate is expected to accelerate to 8 percent in the current financial year and the economy will surpass $3 trillion mark in less than five years. There will be some buzz in the banking stocks, as banks have asked for lower provisioning requirement on housing loans, saying that it will help bring down interest rates and boost demand in the struggling construction sector that has big job creation potential. Textile stocks will see some action with a report that the government will unveil a new national textiles policy next month that seeks to create 35 million new jobs by attracting foreign investments.

The US markets ended with steep loss in last session amid concerns about Greece and the possibility the debt-laden country will exit the eurozone. Traders largely shrugged off a report showing US pending home sales climbed to a nine-year high in May. The Asian markets have made mostly a positive start, recovering from the sharp fall of last session, though the Chinese market was once again deep in red, down by over 4 percent, to the lowest levels in almost three months as traders unwound margin positions.

Back home, pressurized by weak global cues, Indian equity benchmarks ended the Monday’s trade with a cut of over half a percent. Sentiments remained dampened after Greece and international creditors failed to come to an agreement over debt payments raised fears of Greece’s exit from the euro zone. Investors also remained concerned over Finance Secretary Rajiv Mehrishi’s statement that India is monitoring developments after the breakdown in talks between Greece and its creditors, but does not have a firm plan in place to deal with any significant fallout. Meanwhile, there was some cautiousness with Indian and Mauritian officials starting talks on proposed amendments to their bilateral tax treaty. Mauritius has submitted a “draft protocol” with regard to amending the Double Taxation Avoidance Convention (DTAC). A Joint Working Group has been set up to find a mutually acceptable solution towards revision of the pact. Domestic bourses made a gap-down start and the indices even went on to test important psychological 27,200 (Sensex) and 8,200 (Nifty) levels, but the key gauges got some support near those intraday low levels, as they trimmed most of their losses from thereon as investors continued hunt for fundamentally strong stocks. Some support seems to have come with the India Meteorological Department (IMD) stating that the South-west Monsoon covered the entire length and breadth of the country, way ahead of schedule in a year that saw a forecast of deficit rainfall for India. Global cues too remained feeble after Greece closed its banks and imposed capital controls as a result of its debt problems, while Asian markets too ended lower. Back home, selling was both brutal and wide-based as none of sectoral indices, barring FMCG, on BSE were spared. Counters, which featured in the list of worst performers, include realty, software, infrastructure and auto. Depreciation in Indian rupee too dampened the sentiments. Finally, the BSE Sensex declined by 166.69 points or 0.60% to 27645.15, while the CNX Nifty lost 62.70 points or 0.75% to 8318.40.