Markets likely to get a soft-to-cautious start

The Indian markets witnessed a choppy day of trade in last session and despite some final hour upmove, closed flat with a quarter percent of gains. Traders remained cautious ahead of the global developments. Today, the start is likely to be flat-to-cautious as there is not much support from the global markets. Telecom stocks are likely to be buzzing today, as there is a meeting of the empowered group of ministers on spectrum price scheduled today and it is learnt that Prime Minister Manmohan Singh has asked Finance Minister Pranab Mukherjee to ensure that crucial decisions be taken before he steps down. On the same time cable related stocks are likely to come under somber mood as much awaited digitalization of cable TV services in four metros will now have to wait for four months beyond July 1. The ministry of information and broadcasting has decided to modify the 30th June deadline for a complete switch over to 31st October 2012. Power equipment sector stocks are likely to remain under pressure on buzz that the power ministry, in the next couple of weeks, will move a note to the Union Cabinet proposing a levy of 21% on imported power equipment. Traders will also be eyeing the movement of rupee after it fell beyond 56 level in last session on RBI governor D Subbarao’s statement that growth would have to be sacrificed to bring inflation under check.

The US markets made a mixed closing, mildly disappointment with the Federal Reserve's decision to extend "Operation Twist" aimed at pushing down long-term interest rates and boosting the economy. Though, it said it expects economic growth to continue to grow moderately over coming quarters and then to pick up gradually but it lowered its expectations for US GDP growth in 2012, going to a range of 1.9-2.4% from 2.4-2.9%. The Asian markets have made a soft start with US FOMC meeting going just for extension of its asset-purchase program beyond June and barring the Japanese market all other indices are in red. Japanese market was encouraged by the Finance Ministry data that foreign investors were net buyers of Japanese stocks last week. Chinese market has lost the most, as HSBC preliminary PMI for June came at 48.1 against 48.4 in May.

Back home, after climbing close to 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 narrow band, lacking any significant upside triggers. The local markets failed to match the fervor that was evident in most Asian markets as market participants globally remained cautious ahead of the US FOMC outcome in which the central bank is expected to announce stimulus package. However, markets in Europe exhibited subdued trends as major markets there hardly budged after previous session’s close to two percent rally. On the domestic front, cues from the money market remained sedate as the rupee, Asia’s worst performing currency, inched above the psychological 56 per dollar levels. Meanwhile, shares of power equipment makers including heavyweights like L&T and BHEL rallied with fervor after the Prime Minister's office convened a meeting to discuss the contentious issue of imposing duties on foreign equipment imports. The power minister is expected to submit a new proposal for a potential import tax to a cabinet of ministers. Besides, stocks from the cement sector, which traded on a somber note for most part of the day amid reports that Competition Commission of India (CCI) may soon impose steep penalties on them over alleged price cartelization, staged a sharp turnaround in the dying moments of trade as it became certain that the competition watchdog CCI was unlikely to give an order on cement cartel in the day. On the BSE sectoral space, hefty buying was evident in the Metal counter, which surged over one and a quarter percent and remained the top gainer in the space followed by the Capital Goods and defensive Healthcare counter, which surged over a percent each and supported the benchmark indices. On the flipside, the fall in Information Technology and defensive FMCG sectors by around half a quarter percent capped the upside for the bourses. Finally, the BSE Sensex gained 36.83 points or 0.22% to settle at 16,896.63, while the S&P CNX Nifty rose by 16.70 points or 0.33% to close at 5,120.55.