The Indian markets concluded the month of May and the F&O series on a daunting note, with major indices despite a valiant recovery attempt in last suffering a cut of more than half a percent. The unexpectedly weak GDP numbers were absorbed due to the short covering of series before expiry. Today, the mood is likely to remain somber and the impact of weak GDP numbers will be visible amid listless global cues. However, there was one comforting number that may give some solace to the frenzied investors’ as country's fiscal deficit narrowed to 5.75 per cent of the gross domestic product (GDP) in 2011-12, compared with 5.9 per cent in the revised estimates. Also, the government has announced a series of austerity measures in a bid to cut its non-plan expenditure by 10 per cent during the current fiscal. The telecom stocks are likely to be buzzing as the cabinet approved the New Telecom Policy 2012, which will let users to retain the same number when they change service providers across the country, it also aims to do away with roaming charges.
Meanwhile, RBI in its draft report has favoured relaxing the investment limit for foreign institutional investors (FIIs) in sovereign bonds, and also doing away with witholding tax. The report also favours reviewing of trading norms for foreign investors in the derivatives segment.
The US markets witnessed a volatile day of trade on Thursday and amid weak domestic economic numbers managed to recover some ground on report that IMF was preparing a contingency plan to rescue Spain. Though, there were disappointments from the economy front, US economy grew at an annual rate of 1.9 percent in the first quarter of 2012, down from an earlier estimate of 2.2. Barring the Chinese markets all the major indices in the Asia have made a weak start, extending their slide in the new month on weak US economic data and a report that showed Chinese manufacturing slowed.
Back home, the May series futures and options contract expiry day turned out to be a resilient session for the stock markets in India, which digested the horrendous fourth quarter economic growth numbers and settled only with moderate cuts of around half a percent. The benchmark equity indices staged a late recovery following some short covering in the derivative expiry session while optimism in European markets too let its much needed support to domestic bourses. However, investors continued to fear about the uncertainty over Asia’s third largest economy’s expansion rate after it plunged off the cliff to a meager 5.3% growth rate in the January - March quarter from 9.2% in Q4 2011, the lowest since 2002-03 when the economy grew by 4%. The GDP growth for 2011-12 has also been revised downwards to 6.5 percent as against the advance estimate of 6.9 percent released in February 2012. The markets also were pummeled by the weak cues from money market in the first half, however the beleaguered currency recovered a great deal in the second half on the back of buzz that the Reserve Bank of India has asked state oil companies to restrict purchases of dollars through four state-run banks. Though RBI and senior officials later clarified that the reports were untrue however, that did not lead to further depreciation in rupee, thereby supporting sentiments in equity markets. Meanwhile, a separate report showed India's eight core industries growth having a combined weight of around 38% percent in the IIP slowed down to 2.2 percent in April from the 4.2 percent same period last year, mainly due to poor performance by crude oil, natural gas, petroleum and fertilizer sectors. On the BSE sectoral front, investors were once again seen squaring off hefty positions from the rate sensitive Automobile counter, which got battered by close to two percent, being the top laggard in the space. Other rate sensitive Bankex pocket along with Capital Goods sector got pounded by around a percent and prevented the frontline indices from gaining strength. On the other hand, investors covered hefty short positions in the high beta Realty pocket, which climbed about a percent. On the global front, Asian markets continued to show weakness as most indices settled on a negative note after Japan’s industrial production rose merely 0.2% in April as against March month’s 1.3 percent increase. Finally, the BSE Sensex lost 93.62 points or 0.57% to settle at 16,218.53, while the S&P CNX Nifty declined by 26.50 points or 0.54% to close at 4,924.25.
