Markets likely to get a soft-to-cautious start

In last session, the Indian markets after getting a good start, lost their momentum in the second part of the day and made a flat closing. GDP growing at weakest annual pace in almost three years in the quarter ended December sapped the bullish mood of the investors. The GDP is estimated at 6.1% as compared to the growth rate of 8.3% in Q3, 2010-11. Today, the mood is likely to remain somber and the indices may get a soft-to-cautious start, however recovery can be expected in the second half of the day. Telecom stocks are likely to be buzzing as the government has indicated that it will not be able to meet the deadline set by the Supreme Court for fresh auctions of 2G airwaves after cancelling of 122 mobile permits. While cancelling mobile permits of eight of the 14 telecom firms operating in the country, the Supreme Court had on February 2 ordered the government to hold fresh auctions within four months to redistribute the permits and airwaves. Banking stocks too may see some action as they have sought more clarity from the RBI about classification of stressed accounts and demanded that they be allowed to mark a restructured account as standard one if it adheres to the revised payment schedule for a year.

The US markets closed lower on the last trading day of February, weighed by hawkish testimony from Federal Reserve chairman Ben Bernanke. The indices traded firm but lost their momentum after Bernanke suggested that improvements in the US economy may lessen the need for further monetary stimulus. Most of the Asian markets have made a good start, Chinese market was up by a quarter percent supported by property and infra companies on speculation that the country will ease property curbs as inflation slows. Japanese market too has moved higher on further easing by the Bank of Japan and receding concern about financial meltdown in Europe.

Back home, all hopes of an extension of Tuesday’s relief rally got shattered for the increasingly vulnerable Indian stock markets on Wednesday as most heavyweight stocks that gained solid ground earlier in the day lost direction in the second half of trade. Benchmark indices commenced the session on a promising note with a gap up opening, as sentiments remained sanguine across the globe. However, the psychological 18,000 (Sensex) and 5,450 (Nifty) proved as stern resistances which the frontline indices failed to break despite repeated attempts. The key indices also failed to capitalize on the early momentum as sentiments got undermined by the disappointing third quarter GDP growth numbers. Economic activity in the country expanded at its weakest annual pace in more than two years in the three months to December, largely because high interest rates and rising input costs constrained investment and manufacturing. Profit booking in Capital Goods, defensive - FMCG and rate sensitive - Banking counters capped the gains for the bourses. Besides, the poor core sector growth numbers which showed output of key infrastructure industries grew at its slowest pace in three months too underscored that a quick revival in industrial production is a distant dream. However, hefty gains in Oil and Gas heavyweights like ONGC and Reliance which also have significant weightage on the benchmark indices, capped the downside chances for the equity gauges. ONGC shares got filliped after government gave approval for divesting 5 percent holding in the company through stock auction mechanism. On the global front, cues remained encouraging through the day as most Asian indices finished the day’s trade in the positive terrain as apart from upbeat US consumer confidence data encouraging Japanese industrial production which expanded at a better than expected pace of 2 percent in January along with South Korea’s factory output data which grew 3.3 percent exceeding estimates, underpinned sentiments. Back home, the NSE’s 50-share broadly followed index Nifty, went home with single digit gains and settled below the psychological 5,400 support level while Bombay Stock Exchange’s Sensitive Index - Sensex added only twenty two points to close above the psychological 17,750 mark.