Markets likely to get a soft-to-cautious start

The Indian markets continued consolidating for the third day and closed with about a quarter percent of gain in last session. Though, the trade remained choppy and indices once entered the red but the better than expected Services PMI data helped the markets move higher. Today, the start is likely to be mildly soft as the regional peers are trading mostly in red and the monsoon concern continue to weigh. Even RBI has said that its policy action in the forthcoming quarterly review this month-end will depend upon the progress of monsoon and it would rely on the Meteorological Department for forecast. The IT sector is likely to remain in somber mood with US government’s decision to stick by the onshore model for two new projects; however president of NASSCOM Som Mittal has said that this change in trend does not necessarily have a huge adverse impact on Indian I-T companies. Meanwhile, there is good news for the iron ore industry as 8 Karnataka iron ore mines will resume operations by the end of July, possibly adding around 5.5 million tonnes per annum (mtpa) and easing some supply constraints. Realty stocks are likely to remain buzzing as the Union cabinet has approved the extension to the home loan subsidy.

The US markets remained closed on Wednesday on account of Independence Day holiday, unable to give any cue to the other global markets. Most of the Asian markets have made a weak start, snapping their six days gaining streak as a worsening economic crisis in Europe has overshadowed expectations that the European Central Bank will cut interest rates today. Japanese market too was marginally in red despite Bank of Japan Governor Masaaki Shirakawa saying that BOJ will continue monetary easing.

Back home, it turned out to be yet another day of consolidation for stock markets in India on Wednesday with the benchmark equity indices moving only slightly higher from their previous closing levels as investors lacked conviction to open fresh positions amid a lot of uncertainties surrounding the global as well as domestic markets. The psychological 17,450 (Sensex) and 5,300 (Nifty) levels proved as strong support levels as the key indices despite repeated attempts settled above those levels. The frontline indices pruned most of their gains after hitting intraday highs in early morning session. The key gauges even drifted into the negative terrain in afternoon trades but bounced back soon into the green zone after hitting the lowest point in the session and eventually settled on a flat note with gains of around a quarter percent. The key gauges gyrated in a tight range in positive territory for most part of the day. Cues on the domestic front, from the money market remained lackluster as Indian rupee halted the fourth session appreciating run and depreciated to the 54.50 per dollar levels. Meanwhile, the HSBC services PMI survey, which indicated that India's services sector activity expanded in June for the eighth consecutive month although at a slower clip, did little to underpin sentiments. The report highlighted that though rise in new orders are likely to hold up service sector activity in coming months, however falling demand from India's traditional overseas trading partners like the United States and the European Union could dampen future growth prospects of Indian companies. On the BSE sectoral space, the Metal sector shares staged a strong rally of over two percent and remained the top gainer led by sharp moves in stocks like Sterlite Industries and Sesa Goa, which jumped around five percent after the Ministry of Mines directed the Indian Bureau of Mines (IBM) to expedite the process of surveying of iron ore mines in co-ordination with different agencies, including the state government. The high beta Realty index also surged close to two percent in the session and capped the downside for the markets. On the other hand, some profit booking was evident in the Oil & Gas counter which dropped about half a percent and remained top laggard in the space followed by the defensive FMCG and IT pockets which slipped by under half a percent. The BSE Sensex gained 37.10 points or 0.21% to settle at 17,462.81, while the S&P CNX Nifty rose by 14.60 points or 0.28% to close at 5,302.55.