Market mood likely to remain cautious; rupee movement eyed

The Indian markets snapped the last session with marginal gains due to late hour bounce back supported by the surge in the rupee, however the mood remained pessimistic. Today, the start is likely to be soft-to-cautious and traders will be closely eyeing the movement in rupee as the depreciating rupee has raised the concerns about a widening current account deficit. Meanwhile, giving some relief to the India Inc. the Securities and Exchange Board of India (Sebi) has relaxed rules for promoters planning to reduce their stake in companies through an open offer of shares to institutional investors over the stock exchanges. The infra stock may gain some strength, as the government has put in place a system to monitor progress for projects under the public-private partnership (PPP) mode and those being executed by private sector companies. Apart from this, there will be lots of scrip specific movements to keep the markets buzzing, it has been reported that lessors have taken back 34 aircraft from cash-starved carrier Kingfisher Airlines on default of lease money.

US markets closed higher on Tuesday on getting upbeat data on home prices, major indices managed to recover some of their losses of last session. However, the gains were capped as US consumer confidence fell to its lowest in five months in June, while from Europe too there was no good news as Spanish borrowing costs jumped. The Asian markets have made a mixed start with some indices trading marginally in red on European concerns despite good US housing report and speculation that China may step up efforts to support its economy.

Back home, stock markets in India finally extended their consolidation phase on Tuesday as the benchmark equity indices halted the two session southward journey and negotiated their first positive close in last three sessions with slight gains. After hitting the lowest point in the session, the frontline indices showed some signs of recovery in dying moments of trade and closed with a positive bias but did not budge a great deal from previous closing levels. It turned out to be a choppy session of trade as the frontline indices trading in an extremely tight range. The psychological 16,900 (Sensex) and 5,100 (Nifty) levels proved as strong support levels as the key indices despite repeated attempts refused to go substantially below those levels. The local markets overlooked the largely pessimistic trend that most Asian markets exhibited since investors in the region remained concerned that the European crisis might not get a solution even in this weeks' Summit. On the domestic front, cues from the money market remained uninspiring for most part of the session as the rupee continued its streak of depreciation. However, the rupee bounced back sharply in late hours on the buzz that RBI probably sold dollars via state-run banks as the Indian currency approached a record low against the dollar. On the BSE sectoral space, the Oil & Gas pocket surged over a percent after government allowed conditional oil import from Iran on cost, insurance and freight (CIF) basis for six months starting July 1, 2012 or till the issue is resolved. India also secured a waiver from US sanctions which prohibits import of crude oil from Iran in an attempt to check Tehran’s nuclear ambitions. The beaten down Power counter too bounced back after getting pummelled in the last session and traded with gains of close to a percent. However, investors were seen booking profits in the defensive FMCG counter, which sank close to a percent and capped the upside chances for the benchmarks. The NSE’s 50-share broadly followed index Nifty, added single digit gains to settle above the psychological 5,100 support level while Bombay Stock Exchange’s Sensitive Index - Sensex rose twenty four points to finish above the crucial 16,900 mark. Moreover, the broader markets too settled on a positive note with the Mid Cap index outperforming all its larger peers as it closed with gains of over one third of a percent. Finally, the BSE Sensex gained 24.42 points or 0.14% to settle at 16,906.58, while the S&P CNX Nifty rose by 6.15 points or 0.12% to close at 5,120.80.