Markets to make a soft start; assembly election results to give direction

The Indian bourses snapped their two days gaining streak in last session led by auto companies, even though the banking shares bucked the trend. Today, the start is likely to be weak on somber global cues. Traders will be concerned with April FOMC minutes, which showed most of its rate-setting officials, were in favor of boosting borrowing costs next month should the U.S. economy continue to improve. On domestic front traders will be eyeing the state assembly election results for cues. However, there will be some support with global rating agency Standard and Poor’s (S&P) statement that India is likely to remain insulated from the developments in the Chinese economy provided the government carries out structural reforms to take the economy to an eight per cent growth path. There will be some buzz in the pharma sector, as the government has approved three foreign direct investment proposals, all related to the pharmaceutical sector, worth Rs. 60.73 crore. The oil & gas sector too may see some action, Minister of State for Petroleum and Natural Gas, Dharmendra Pradhan stating that natural gas from coal bed methane is likely to contribute to five per cent of national gas production by 2017.

Also, there will be lots of important earnings announcements to keep the markets buzzing. Lupin, SpiceJet , Manpasand Beverages, Dishman Pharma, ICRA , Pidilite Industries and Rane Engine are among many to announce their numbers.

The US markets made a mixed closing in last session, as traders turned a bit cautious following the release of the minutes of the latest Federal Reserve meeting, which hinted strongly at the possibility of an interest rate hike next month. The Asian markets have made mostly a weak start, with prospect of US Fed’s June interest-rate hike firming up. While the Chinese market was modestly in red, the Japanese market has declined marginally on yen strength.

Back home, Indian benchmarks showed a lackadaisical performance on Wednesday as they failed to snap the session in the green territory and settled marginally below the neutral line amid weak global cues. Investor’s sentiments turned subdued in the very beginning with a top US official’s statement that India needs to modernise and reform its economic governance to expand trade and attract the kind of foreign direct investment it needs to build infrastructure. Confidence was further hit by the repot that foreign portfolio investors (FPIs) sold shares worth a net Rs 224.97 crore on May 17, 2016.  Besides, depreciation in the rupee against dollar, which fell for the fifth day, also weighed on the sentiment. Indian rupee depreciated by eight paise to trade at 66.95 against the US dollar at the time of equity markets closing, due to fresh buying of the American currency by banks and importers. However, market participants got some support with the private repot that indicate the growth recovery in Indian economy is becoming more 'broad-based' with rise in public sector capital expenditure and foreign direct investment. Also, going forward the consumption growth is expected to pick up further. Also, Indian consumers were the most confident in the world in terms of job prospects, personal finances and concerns in the first quarter of 2016 with their confidence index touching a nine-year high during the period, according to a study by global performance management company, Nielsen. The Consumer Confidence Index score for India increased three index points in the first quarter to a score of 134, the highest for the country since 2007 and comes after three consecutive quarters at 131. On the global front, European shares declined on Wednesday, while Stock markets in Hong Kong and China fell amid concerns that signs of recovery in its economy may be short-lived. Back home, the benchmark got a gap down beginning after investors largely remained influenced by gloomy global developments as strong US inflation data rekindled prospects of the central bank raising rates later this year. Thereafter, the key indices failed to show any kind of aggressive move as they oscillated around the lower levels for most part of morning trades and drifted deeper into the red terrain in late session. Finally, the BSE Sensex ended lower by 69 points or 0.27% to 25704.61, while the CNX Nifty dropped 20.60 points or 0.26% to 7,870.15.