Markets to get a cautious start on mixed global cues

The Indian markets turned cautious in last session and ended with modest cuts after a choppy trade; though onset of monsoon in major parts and forecasts of heavy rainfall in remaining parts of the country in the next few days helped limit the losses. Today, the start is likely to be a bit cautious on mixed global cues and concern of the Britain’s exit from the European Union. Meanwhile, industry body Assocham has said that government must put in place a contingency plan to fight off the volatility arising out of the referendum on ‘Brexit’ slated for Thursday as it is bound to unnerve the global financial markets. Traders may get some support with an UNCTAD report stating that India's foreign direct investment is likely to cross $ 60 billion this year on favourable policy environment even as the FDI flows globally are set to witness a decline. It has said that the large increase of announced greenfield investments in manufacturing industries may provide further impetus to FDI this year. Also, the Commerce Ministry has asked traders body CAIT to prepare a list of issues, including taxation and banking, which are hindering ease of doing business in the country. There will be some buzz in the coal and mining stocks, as the coal secretary Anil Swarup has said that right now markets do not justify auction of coal blocks. He added that last round of auction has not seen many takers and there are least chances of auction of coal blocks in the near future.

The US markets continued their upmove and ended with modest gains in the last session after Federal Reserve Chair Janet Yellen in her testimony before the Senate Banking Committee said that a cautious approach on interest rates remains appropriate amid considerable uncertainty about the economic outlook. The Asian markets have however made mostly a lower start ahead of the UK’s vote on membership of the European Union tomorrow; the Japanese market was leading the losers pack after the yen strengthened against other major currencies.

Back home, it turned out to be a lackadaisical performance from the Indian benchmark indices on Tuesday as they failed to snap the session in the positive territory, settling marginally below the neutral line. The key indices oscillated in an extremely tight range through the session as market participants remained on the sidelines lacking conviction amid the persistent worries ahead of Thursday's British vote, as well as Federal Reserve chief Janet Yellen's two-day testimony before Congress starting later on Tuesday.  Besides, factors like depreciation in rupee values against the dollar and FIIs outflow in the previous session also weighed on the sentiment. Indian rupee weakened by twenty paise to trade at 67.51 against the US dollar at the time of equity markets closing due to fresh buying of the American currency by banks and importers. However, investors got some comfort with latest reform in Foreign Direct Investment (FDI) regime for a host of important sectors including defence, civil aviation and pharmaceuticals along with advancement of monsoon rains. Monsoon rains have covered nearly half of the country, accelerating planting of summer crops like paddy rice, soybeans, cotton and pulses. The June to September monsoon is crucial for farm output and economic growth in India, where just over half of arable land is fed by rain. On the global front, Asian markets ended mostly higher, while the European shares steadied on Tuesday. Earlier, the local benchmark got off to a soft start as the indices showed signs of consolidation in early trade, a session after the awe-inspiring close to a percent rally. The indices moved only sideways thereafter but touched intraday lows in the noon session due to lack of encouraging leads. However, some short covering in the dying hours of trade ensured that the bourses snap the session with moderate cuts. Finally, the BSE Sensex ended lower by 54.14 points or 0.20% to 26812.78, while the CNX Nifty dropped 18.60 points or 0.23% to 8,219.90.