Markets to get a cautious start but may recover in latter trade

The Indian markets slumped in last session on global growth worries and weak earnings from some of the major companies. Today, the start of the final day of the week is likely to remain weak, however some lower level buying can appear later in the day and markets will see some recovery after deep gash of last session. Traders are likely to get some support with Reserve Bank of India (RBI) Governor Raghuram Rajan’s statement that the ongoing clean-up of bank balance sheets will help spur economic growth and improve the lenders’ profitability. He has also said that while the profitability of some banks may be impaired in the short-run, the system, once cleaned, will be able to support economic growth in a sustainable and profitable way. Also, the RBI assured banks that it would inject adequate cash in view of the tight liquidity conditions in the market. Meanwhile, India Ratings and Research has said that the country needs to raise its labour productivity growth to 7.3 percent to attain a GDP growth rate of 9 percent. There will be lots of major companies reporting their numbers that will keep the markets buzzing for the day.

The US markets despite late day recovery ended lower in last session, with Dow ending the session at a two-year closing low. Traders largely shrugged off a report from the Labor Department showing a bigger than expected decrease in initial jobless claims in the week ended February 6th. The Asian markets have made mostly a lower start, led by the Japanese market which is down by around five percent, heading for the worst week since 2008 as anxiety over central banks’ ability to revive the world economy fueled a rally in the yen.

Back home, Thursday’s session turned out to be a disaster for the Indian benchmarks which crumbled like a ‘house of cards’ and went on to breach various key technical levels in the over three percent freefall. The frontline indices which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the journey only halted with the session’s close. Sentiments got undermined after US Federal Reserve chair Janet Yellen in a testimony to Congress stated that global economic turmoil and massive sell-off in global equity markets could spook the US economy, but showed faith in the US economy, rekindling hopes that there will be further rate hikes during the rest of the year. On the domestic front, sentiments remained somber with the report that foreign institutional investors’ (FIIs) shareholding in Indian companies dropped to lowest level in nearly three years at the end of December quarter. Percentage of FII holding in 1,000-odd companies listed on the NSE stood at 18.67%, lowest since March 2013. Besides, decline in the rupee coupled with a slide in the crude oil prices also dented the sentiments. Indian rupee again breached the 68-mark as it fell by 17 paise to 68.02 against the American currency, as the demand for dollar from banks and importers gathered pace, while Oil prices slid as record US crude inventories and worries about a global economic slowdown. Meanwhile, cautiousness ahead of the release of Industrial production figures for the month of December and Retail inflation data for the month of January, also kept market-participants on the tenterhooks. On the global front, European markets made an awful start, while Asian markets ended mostly in the red. Back home, the benchmark got off to a weak start and the indices breached the psychological 7,200 and 23,600 levels in the early moments of trade since investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The steep fall turned even acute after the opening of European markets in the noon trades, as one negative report after another from the continent kept creating havoc for the local bourses. Finally, the BSE Sensex slumped by 807.07 points or 3.40% to 22951.83, while the CNX Nifty plunged by 239.35 points or 3.32% to 6,976.35.