Markets to get a cautious start after a rally in last session

The Indian markets went for a smart bounce back in last session after suffering severe cut in the preceding one, news of Euro-zone leaders agreeing to bailout the embattled Spanish banks led the markets higher in the second part of the day, all the sectoral indices surged with capital goods taking the lead on expectation of better IIP number later this week. Today, the start is likely to remain cautious and the concern of slowing global economy is likely to weigh on the domestic market movements too. However, based on several policy initiatives taken by the government, the Planning Commission deputy chairman Montek Singh Ahluwalia is expecting the Indian growth story to be back on track by October. There will be some somberness in banking licence hopefuls as the wait for final guidelines on new banking licences just got longer after RBI notified that different participants to its draft guidelines have sought greater clarity on different issues. There will be two important result announcements of CMC and HDFC that will give some direction to the markets.

The US markets continued their decline on Tuesday on various profit warnings from the technology sector companies adding to concerns, the economy is losing steam. Though Alcoa Inc. reported better than expected numbers but Advanced Micro Devices and Applied Materials Inc tumbled after slashing their future outlook. The Asian markets have made a mixed start on earnings concern on deepening global economic slowdown. Japanese market was down by about half a percent as the yen rose to a five-week high against the euro before a Bank of Japan policy decision tomorrow.

Back home, after witnessing steep fall in previous session, bulls retaliated back on Tuesday with Indian bourses hitting fourteen week high following firm European cues. Moreover, expectations that leading companies may report encouraging first quarter numbers helped the local benchmarks to snap the day’s trade with massive gain of over a percentage point. Though, benchmarks, after a decent opening, remained range bound for most part of the day’s trade as they constantly faced resistance near 17,500 (Sensex) and 5,300 (Nifty) levels. However, cues from the Asian markets remained subdued as most of the regional peers ended the session in the negative terrain as China’s imports grew less than estimated in June while export growth slowed, suggesting slowing economy. Chinese imports rose 6.3 percent in June from a year ago, less than half the forecast of a 12.7 percent rise, while exports grew 11.3 percent y-o-y, faster than expectations for a 9.9 percent increase. Domestic benchmarks picked up pace in last leg of trade and surpassed their crucial 5,300 (Nifty) and 17,600 (Sensex) levels following turnaround in European counters, which traded firm in early trade after a cautious start. The euro zone ministers agreed to grant Spain an extra year until 2014 to reach its deficit reduction targets and set the parameters of an aid package for Madrid’s ailing banks. Back home, investors continued to take positions in metal stocks and scrips like Hindalco, Sesa Goa and Jindal steel rose 2-3 percent. US aluminum giant Alcoa reported Q2 June 2012 earnings and revenue that beat market expectation after an increase in orders from the auto and aerospace industries. Back home, shares of tyre manufacturer edged higher after international rubber prices tumbled on worries over the sluggish global economy. Shares of MRF, Falcon Tyres, Apollo Tyres, CEAT and JK Tyre & Industries edged higher in the trade.  On the BSE sectoral space, defensive FMCG counter, which remained the lone loser till first half, turned out to be the major gainer in the end on report that monsoon, which came late, seems to be advancing gradually to cover most parts of the country. Finally, the BSE Sensex surged 226.37 points or 1.30% to settle at 17,618.35, while the S&P CNX Nifty soared by 70.20 points or 1.33% to close at 5,345.35.