Markets to make a somber start on weak global cues

14 Jan 2016 Evaluate

The Indian markets showed some bounce back and ended with decent gains in last session, though trade remained choppy but sentiments across the region were supported by better-than-expected China trade data. Today, the start is likely to be somber, tailing weak global cues. Traders will also be cautious with global ratings agency Moody's statement that lower rate of inflation and a sharp decline in prices of commodities like crude oil and steel would lead to accelerated growth only if corporate and bank balance sheets are repaired and the private sector remains internationally competitive. It said that declining inflation and lower commodities prices have placed Indian economy in a stronger position relative to similarly rated emerging economies and have also reiterated its view that India will remain one of the fastest growing large economies in 2016. Traders may get some support with the Finance Minister Arun Jaitley's statement that the economy is moving in the right direction and the pace of growth will gather momentum in the coming quarters on the back of on-going structural reforms. There will be some buzz in consumer durables and auto stocks, as the government has decided to set up a high-powered panel headed by Cabinet Secretary P K Sinha to process the recommendations of the 7th Pay Commission.

The US markets resuming the sell-off, plunged again in last session, as investors grew anxious about weak energy prices, US corporate earnings and the global economy. The Asian markets have made a weak start taking cue from steep losses on Wall Street overnight. Japanese market has slumped as the country’s core machinery orders fell 14.4 percent in November from the previous month, down for the first time in three months. Traders in the region continue to keep an eye on China's yuan.

Back home, a session after displaying a distressing performance, Indian benchmark indices managed to pull through a scintillating performance by rallying over half a percent on Wednesday. Sentiments got a boost with Paris-based think tank OECD stating that India is witnessing firming economic growth while most of the developed economies are seeing mixed trends. The assessment based on Composite Leading Indicators (CLIs) stated that India's CLI inched up to 100.4 in November from 100.2 in October. Some support also came with Moody’s Investors Service expects India to remain among the world’s fastest growing major economies in 2016, but believes market trends this year will depend on whether inflation remains under control and corporate profits revive. The NSE’s 50-share broadly followed index Nifty, shut shop after surging over half a percent and regained the crucial 7,550 support level while Bombay Stock Exchange’s Sensitive Index, or Sensex accumulated over one hundred and fifty points to close a tad above the psychological 24,850 mark. Investors were cheered by gains on Wall Street that snapped a losing streak, including an eight-day slump for the Nasdaq composite. However, marketmen were pessimistic for most part of the session as India's consumer inflation probably edged up for the fifth straight month in December, driven by higher food prices, complicating the central bank's task of steering monetary policy at a time of international deflation. Also, Industrial production (IIP) contracted by 3.2 per cent in November -- the lowest level in over four years -- due to poor performance of manufacturing sector and a sharp decline in capital goods output. Earlier on Dalal Street, the benchmarks got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. However, the indices slipped into the negative territory and even went on to test important psychological 24,400 (Sensex) and 7,450 (Nifty) levels. The key gauges got solid support around those intraday low levels as they convalesced from thereon. The bourses further capitalized on the late momentum and spurted in afternoon trades on the back of broad based bottom fishing in undervalued stocks. But, a mild profit booking in dying moments of trade ensured that the key indices shut shops off the intraday highs. Finally, the BSE Sensex gained 172.08 points or 0.70% to 24854.11, while the CNX Nifty ended up by 52.10 points or 0.69% to 7,562.40.

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