Markets likely to extend the southward journey with a soft start

The Indian markets remained under pressure in the last session and lost about a percent, weighed by the global as well as weak local economic reports. All the high beta sectors suffered cut of over a percent. Today, the trade is likely to get a soft start, though some recovery can be expected in latter part of the trade after last session’s drubbing. Telecom sector is likely to remain in limelight as major telecom service providers have claimed that tariffs may rise by 25 to 30% on account of high spectrum prices, if the government accepts recommendations of the TRAI. However, the regulator strongly refuted their figures and said that the impact will be only between 3% and 6%. Traders will also be eyeing the movement of Indian currency, which has slid to its fresh four months low, though it has supported the exporters but on the same time has been hurting the importers. There will be stock specific actions too, to keep the markets buzzing, and market heavy weight Reliance Industries may come under pressure as oil ministry has served a notice to the company, disallowing $1.45 billion of cost recovery from the eastern offshore KG-D6 fields for failing to meet its drilling commitment. The ministry has refused to join arbitration saying there is no dispute till now, but the notice establishes there is a dispute over the amount of cost that can be recovered.

There will be some important result announcements too. Bank of Baroda, Corporation Bank, Gillette India, NIIT Tech and Tata Teleservices are among the many to announce their numbers today.

The US markets closed lower on Thursday weighed down by the mixed set of economic reports, while the Weekly initial jobless claims came in better than expected, in late trades a report on activity in the US services sector came disappointing and same-store sales for last month came in relatively soft, taking the major indices lower by about half a percent. Most of the Asian markets have started in red, dragged down by the frail economic reports from US and weakness in commodities.

Back home, Thursday turned out to be a daunting session of trade for the Indian stock markets, which extended the southbound journey for second straight session and gave up around a percentage points. The frontline gauges remained choppy through the day and drifted to lowest point in the session in the last leg of trade. After consolidating around the psychological 17,300 (Sensex) and 5,250 (Nifty) levels for last two trading sessions, the benchmark gauges got a breakdown and only found support around the 17,150 (Sensex) and 5,200 (Nifty) levels. Domestic markets, after a sedate opening, failed to show any strength as sentiments remain bleak across the Asian region since investors pondered over the disappointing employment reports from the US and Euro-zone, which showed far fewer than expected jobs were added in April, intensifying concerns over slowing down global economic recovery. On the domestic front, a survey showed India’s service sector activity grew in April thanks to a rise in new business, signaling a below-trend rate of expansion of services output. However, business optimism hit its highest level since last June. Meanwhile, the weakness in rupee persisted for yet another session after it declined to hit fresh four-month low of Rs 53.26 against the American currency as several factors including trade deficit and volatile inflows continued to put pressure on the Indian currency. The rate sensitive counters like Automobile, Banking and Real Estate remained the top laggards in the session as they traded with over a percent cuts each. The weak sales numbers by some major Auto companies and the colossal over 7% collapse in Hero Moto on worries about the impact from the expiration of a state tax exemption it currently enjoys in Haridwar dragged the Auto index. Meanwhile, airline stocks like Kingfisher, Jet Airways and Spice Jet got bludgeoned by over four percent each after reports that the government is unlikely to take a decision on the 49% foreign direct investment in the ongoing Parliamentary session. On the flipside, the gains in IT and TECk counters provided some support to the benchmarks. Besides, sugar stocks rallied with fervor after government removed the cap on sugar exports, placing the commodity under the open general licence category like wheat and rice. Finally, the BSE Sensex lost 150.72 points or 0.87% to settle at 17,151.19, while the S&P CNX Nifty declined by 50.75 points or 0.97% to close at 5,188.40.