Markets to remain in cautious mood with mildly soft start

The Indian markets coming off the intraday low managed a flat closing in last session, with traders digesting RBI’s status quo stance. Today, the start is likely to remain cautious with RBI cutting the economic growth forecast to 6.9 percent for the current fiscal from 7.1 percent estimated earlier, even as the RBI governor said the economy will bounce back to 7.4 percent rate next fiscal. Markets may get some support with governor’s another statement that there is further scope for banks to reduce lending rates as the Reserve Bank has already brought down its policy rates by 175 basis points since January 2015. Marketmen will also be getting some support with reports that foreign direct investment into the country surged by 60 percent to $ 4.68 billion in November 2016, compared to $2.93 billion in November 2015. There will be some buzz in the IT stocks, as global IT major Cognizant has guided for a revenue growth of $3.51 billion to $3.55 billion for March quarter. The company expects March quarter non-GAAP diluted EPS to be at least $0.83 per share. There will be lots of earnings reactions to keep the markets buzzing.

The US markets made a mixed closing in last session after showing a lackluster trade through the day, as traders seemed reluctant to make significant amid another relatively quiet day on the U.S. economic front, though the tech-heavy Nasdaq reached a new record closing high. The Asian markets have made a mixed start with some indices trading marginally in red with the Euro-dollar volatility surged as investors assess political risks in Europe and the US, while the Chinese market extended the rally.

Back home, it turned out to be a lackadaisical performance from the Indian benchmark indices on Wednesday as they snapped the session near neutral line. Sentiments remained dismal after Reserve Bank of India (RBI) maintained status quo on interest rates in its sixth monetary policy review of financial year 2016-17. The central bank decided to change the stance from accommodative to neutral and kept the short-term lending rate, called repo rate, unchanged at 6.25%, opting to wait for more clarity on the trend for inflation. RBI has also cut the economic growth forecast to 6.9 percent for the current fiscal from 7.1 percent estimated earlier. However, inventors got some comfort with the central bank’s statement that demonetisation-induced ease in bank funding conditions has led to a sharp improvement in transmission of past policy rate reductions into marginal cost-based lending rates (MCLRs), and in turn, to lending rates for healthy borrowers, which should spur a pick-up in both consumption and investment demand. It also said the economic activity in cash-intensive sectors such as retail trade, hotels and restaurants, and transportation, as well as in the unorganised sector, is expected to be rapidly restored. Some support also came after Economic Affairs Secretary Shaktikanta Das rejecting arguments that fiscal deficit target of 3.2 per cent is optimistic, said it is realistic and there is all possibility that revenues will exceed the target as Budget has not taken into account the demonetisation windfall. Besides, he said, there would be collection taxes next fiscal from those who fail to avail Pradhan Mantri Garib Kalyan Yojana (PMGKY). On the global front, Asian markets ended mostly lower on Wednesday on lingering political and economic uncertainty in the United States and Europe, which sapped investors’ confidence. Back home, finally, the BSE Sensex declined 45.24 points or 0.16% to 28289.92, while the CNX Nifty was up by 0.75 points or 0.01% to 8,769.05.