Markets likely to extend the consolidation mood with a mild soft start

The Indian markets despite a choppy session of trade managed a green closing in last session. There is likely to be some cautiousness in the markets after a global investment banking major Goldman Sachs in its latest report said that the Indian markets does not present much attractive prospects for investors in the near term amid sluggish domestic and global economic growth outlook. There is likely to be some profit booking too, after the latest twist in the political circle on presidential election. Also, depicting the negative market sentiment collection from the Securities Transaction Tax (STT), has dipped over 14% in the first two months of this fiscal. The STT collection so far this fiscal has been Rs 945 crore compared to Rs 1,103 crore a year ago. There will be some gain in the fertilizer stocks as the Cabinet Committee on Economic Affairs (CCEA) will take up a proposal to hike urea prices by Rs 500 a tonne as part of a series of steps to cut subsidies in the face of an economic slowdown. Meanwhile, traders will be closely eyeing the May inflation numbers, as it will decide the further course of action of RBI. The May WPI is likely to come in at around 7.4%, up from 7.23% in April.

The US markets closed lower on Wednesday after a big rally in previous session on uncertainties over Europe’s finances as Greek banks were seeing elevated levels of withdrawals ahead of the country's crucial general elections this weekend and weak domestic economic news. In US, retail sales, excluding autos, fell in May to their worst level in two years. The Asian markets have mostly made a weak start with only few of the indices showing marginal green tick, as economic reports in the US and Europe added to concern the global economy is slowing.

Back home, after rallying over a percent in last session, Indian benchmark equity indices consolidated their position around the previous closing levels on Wednesday. The psychological 5,150 (Nifty) and 16,900 (Sensex) levels proved as stern resistances as the key gauges failed to surmount those levels by the end. The key gauges displayed listless performance through the day as the aimless benchmarks appeared exhausted and showed only sideways kind of movement in a tight band, lacking any significant upside triggers. After the disappointing industrial production data, market participants have now turned their focus towards the monthly WPI inflation data for May which is forecasted to accelerate at the fastest pace for the year in May at 7.6%. However, the investors are likely to keep a close eye on core inflation number as the fate of monetary easing by the RBI at its policy meeting on June 18 would depend on whether the core inflation remains above or below the 5% threshold. Domestic markets got off to a quiet start as sentiments across global space remained uninspiring. Markets across the Asian region exhibited positive trend as market participants remained in positive mood on growing speculations that central banks globally could make further moves to stimulate the world economy and spur more rapid jobs growth. Though, investors took cue from one of Chicago Federal Bank’s President’s comments of favoring an accommodative policy, however, anxiety over Greek general elections scheduled later this week kept investors on the sidelines. On the domestic front, investors speculated that the RBI will be compelled to cut key interest rates irrespective of what the headline inflation number, in order to bring Asia’s largest economy out of the doldrums. Meanwhile, the beleaguered rupee, which extended its streak of depreciation in morning, strengthened against the US dollar in afternoon trades and eased investors’ concerns to some extent. Moreover, investors were busy squaring off their positions from the rate sensitive Automobile counter amid reports that the government is contemplating the idea of imposing an additional tax on diesel fuelled vehicles, which would increase the prices of diesel cars upto Rs 2.5 lakh and prove to be a double whammy for car manufacturers. Market leader Maruti Suzuki took severe beating as it plunged over three percent. Finally, the BSE Sensex gained 17.71 points or 0.11% to settle at 16,880.51, while the S&P CNX Nifty rose by 5.55 points or 0.11% to close at 5,121.45.