Markets likely to make a cautious start of the last trading day of week

The Indian markets managed to gather some gain in last session, recovering from their consolidation mood, though the concern of delayed monsoon lingered but traders got some respite after Mauritius Foreign Ministry said India has assured Mauritius economic interests won't be harmed and a joint working group will take place on August 27-28. Today, on the last trading day of the week the mood is likely to remain cautious and the start may be on a flat note. There will be some encouragement with Mauritius assuring India of its readiness to resolve the controversy over its tax treaties. Though, the traders will be eyeing the movement of rupee which has been depreciating for the last two days and is likely to weakened further tailing the euro which slipped, hitting one month low after the ECB action. Meanwhile, Home minister P. Chidambaram has said that the Indian economy will revert to the 8-per-cent-growth trajectory in 2012-13 if Indian business houses and public sector units, having piles of cash, make investments to unlock the money. Foreign investors too are likely to get some encouragement as deputy chief to the Planning Commission and a key adviser to Manmohan Singh, Montek Singh Ahluwalia has said that India should refrain from changing the way foreign investors in stocks and bonds are taxed, as the nation prepares rules to clamp down on tax avoidance.

The US markets closed lower on Thursday after a day of break ahead of the jobs report likely to show Europe’s crisis is weighing heavily on the economy and traders booked profit overlooking reports showing hopeful signs on US hiring. The Asian markets have made a mixed start with some of the indices trading lower by around half a percent as the different central banks across globe took measures to revive fretting economy. Traders were worried that the policy makers too are concerned about the gloomier economy after the ECB and People’s Bank of China cut their benchmark borrowing costs, while the Bank of England raised the size of its asset-purchase program.

Back home, after squandering for most part of the session around the previous closing levels, the domestic benchmark equity indices showed some fervor in the last leg of trade and snapped Thursday’s session with about half a percent gains. The frontline indices not only came out of its four straight session consolidation mode but also climbed to the highest levels in more than 13 weeks after sailing beyond the psychological 5,300 (Nifty) and 17,500 (Sensex) levels. The benchmarks exhibited sideways kind of movement for most part of the day as market participants chose to consolidate their positions around previous closing levels, lacking any significant triggers to take the markets either ways. A day after being outclassed by the global markets, the domestic markets gained some ground and outperformed most Asian as well as European counterparts as investors globally awaited European Central Bank's policy decision later in the day. Investors remained concerned over reports that monsoon rains will remain well below normal this year, earlier despite predictions of normal rainfall. Moreover, amid widespread demand for some monetary easing measures to revive Asia’s third largest economy, RBI opined that its policy action in the forthcoming quarterly review this month-end will depend upon the progress of monsoon. On the domestic front, cues from the money market remained pessimistic as Indian rupee extended its depreciating run for the second straight session and inched above the 55 per dollar levels against the US dollar. On the BSE sectoral space, the rate sensitive Banking sector surged over a percent and remained the top gainer led by sharp moves in stocks like ICICI Bank and HDFC Bank. The Capital Goods index also climbed close to a percent in the session and capped the downside for the markets. On the other hand, some profit booking was evident in the Metal counter, which had rallied over two percent in the previous session on reports that 8 Karnataka iron ore mines will resume operations soon. Shares from the IT sector too remained dull amid fears that after the US proposed two deals with a mandatory 'no-offshore' clause, many similar deals could be on the anvil which could adversely impact Indian 100 billion dollar IT industry that thrives on offshore revenues. Finally, the BSE Sensex gained 75.86 points or 0.43% to settle at 17,538.67, while the S&P CNX Nifty rose by 24.75 points or 0.47% to close at 5,327.30.