Markets likely to get a positive-to-cautious start

The Indian markets suffered sharp decline in last hour of trade on Monday with major indices losing over half a percent. IT sector stocks once again dragged the markets lower after another software services provider MindTree despite reporting good numbers gave out a relatively weaker growth outlook for the financial year. Today, the start is likely to be on a positive note as the regional cues are good, though rate sensitives are likely to remain under pressure as dashing hopes of reduction in interest rates Reserve Bank of India’s governor D Subbarao has said that the latest inflation numbers show that it is still way above the threshold level where tolerating price rise could lead to growth. Traders will also be watching for any development in monsoon as Agriculture Minister Sharad Pawar has said that the deficient southwest monsoon would have an impact on the kharif crop this year, though he insisted that there was no drought-like situation in the country yet. There will be some important result announcements too, to keep the markets buzzing.

Meanwhile, the infra sector too is likely to remain under pressure as the planning commission has said the $1-trillion investment target for the infrastructure sector in the Twelfth Five-Year Plan that began this year may be difficult because of the lower-than-expected growth over the plan period.

The US markets made a soft start of the new week and after surging in last session consolidated on Monday. The surprise decline in June retail sales led the indices lower, however the Citigroup’s better than expected earnings limited the losses. The Asian markets have made a positive start with major indices trading up by half to one percent in early trade on hopes that different government will stimulate the world’s largest economies, overlooking IMF’s decision to cut its 2013 global growth forecast. China was trading high as the country has decided to encourage foreign investment into industries including high-end manufacturing, technology and new energy.

Back home, bears tightened their grip over the domestic markets which extended their south bound journey for fourth day in a row on Monday, with benchmarks losing their crucial 5,200 (Nifty) and 17,150 (Sensex) levels. Barometer gauges turned red after a positive opening. Thereafter, markets recovered slightly as June inflation came lower than feared; mounting hopes that RBI will put an end to anti-inflationary stance and would slash key policy rates, to bolster the growth of the faltering economy. The wholesale price index (WPI) for the month of June dropped to 7.25% versus 7.55% in May. The April WPI inflation was revised up to 7.5% as against the provisional 7.23% earlier. Fuel group inflation fell to 10.27% versus 11.53% in May. Inflation in manufactured products for June grew at 5% versus 5.02% in May, while WPI index for food articles in June rose to 10.81% versus 10.74% in May. Primary articles inflation stood at 10.46% versus 10.8% in May. However, the recovery after the inflation number proved short lived as markets once again entered in the red as European counters opened on a sluggish note. Local bourses crashed like house of cards in the last leg of trade to end near intraday low on reports from Indian Meteorological Department (IMD) that Monsoon deficit stands still at 22% as on July 15. Moreover, the investors are waiting for action over diesel price as the government may hike diesel price after presidential election that will be on July 19. Meanwhile, software sector remained the major loser on both BSE and NSE and stocks like, Infosys, TCS, Wipro, HCL Tech and MphasiS  tumbled after the rupee strengthened to one-week high in early session. While, metal shares declined for the second day in a row after the data released on July 13, 2012 showed Chinese economy cooled to its weakest rate of growth in more than three years in Q2 June 2012. Moreover, shares of three public sector oil marketing companies BPCL, HPCL and IOC fell as US crude futures settled at their highest closing level in more than one week on July 13, 2012. Bucking the trend, sugar stocks like Shree Renuka Sugar, Bajaj Hindusthan, Balrampur Chini, Triveni Engineering and Rana Sugar, edged higher in the trade on the report that Food Ministry has proposed imposing 10 percent import duty on sugar as the country has surplus domestic production. Finally, the BSE Sensex lost 110.39 points or 0.64% to settle at 17,103.31, while the S&P CNX Nifty declined by 30.00 points or 0.57% to close at 5,197.25.