Markets likely to make a cautious start, may cheer up new FM in later trade

The Indian markets despite faltering in the mid of trade last day after the RBI’s policy announcement, managed to bounce back, adding another half a percent to their gains. There was concern regarding the RBI lowering GDP to 6.5% from 7.3% and raising inflation forecast to 7% from 6.5% for the financial year 2012-13.Today, the start is likely to be cautious and markets can be seen losing some traction in early trade, as the global cues too have turned sluggish and there is not much on the domestic front too. Though traders may take some solace from outgoing chief economic advisor Kaushik Basu’s sanguine view of the economy, he said that India could be at the helm of affairs in the next decade if it grasps opportunities now. Also markets may cheer up the cabinet reshuffle at the center with P Chidambaram being made the Finance Minister. However, amid lingering reforms fiscal deficit has been reported to have touched 37.1% of the budgeted amount at the end of June. Meanwhile, government in view of the draught like situation has doled out relief package which includes subsidised diesel for irrigation, funds to ensure drinking water, seed subsidy for re-sowing crops and augmentation of fodder supply. There will be lots of result announcements to keep the markets buzzing.

There will be lots of result announcements to keep the markets buzzing. Adani Ports, Adani Power, Engineers India, Glaxosmithkline Cons, Manappuram Finance, PVR, Voltas etc are among the many to announce their numbers today.

The US markets declined further on Tuesday, awaiting the outcome of the Federal Reserve’s two-day meeting when it is widely expected to unveil new stimulus. Though there were some good economic reports, the Conference Board said its index of consumer attitudes rose to 65.9 in July from an upwardly revised 62.7 in June. The Asian markets have made a soft start with majority of indices trading lower by half to one percent. Though, the Chinese market was trading up, but the nation’s manufacturing expanded at the slowest pace in eight months, the PMI unexpectedly fell to 50.1 in July from 50.2 in June. However, traders have taken encouragement with country’s leaders pledging to keep adjusting policies to ensure stable economic growth this year.

Back home, boisterous Indian equity markets managed to elegantly overcome early blues and staged an exciting bounce back from the lowest levels on Tuesday’s session, taking the benchmark indices beyond crucial technical levels. The frontline indices surged over one and half a percentage points from intraday lows to settle comfortably over the psychological 17,200 (Sensex) and 5,200 (Nifty) bastions. Both the benchmarks, after trading cautiously in early session, fell sharply and touching their intraday low levels triggered by a slide in interest rate sensitives banking, auto, realty stocks as the Reserve Bank of India (RBI) at its First Quarter Review of Monetary Policy Statement 2012-13 maintained status quo on its key lending rates, keeping them unchanged, as it choose to rein in inflation over growth. Moreover, what actually affected the sentiment was the lower projection of GDP growth along with higher revision of inflation, which pointed out the stagnation in economy in light of global slowdown. However, the apex bank reduced the Statutory Lending Ratio (SLR) of scheduled commercial banks to 23% from 24% of their net demand and time liabilities (NDTL) with effect from the fortnight beginning August 11, 2012. Markets recovered from the day’s low tracking strength in the global markets. Asian markets ended mostly in the positive terrain with South Korea, Taiwan and Japanese markets closing near the day’s high. European stocks also traded flat to positive in early trade ahead of European Central Bank’s (ECB) meet scheduled for August 2, 2012. There is some speculation that the ECB may resume its bond buying programme to bring down rising Spanish and Italian borrowing costs, but uncertainty persists partly because Germany has repeated its opposition to such a step. Sentiments were also supported by software pack, which surged about a percent and stocks like Wipro, TCS, Financial Technologies and HCL Technologies edged higher in the trade after Prime Minister Manmohan Singh set up a panel headed by N Rangachary to review taxes in information technology and R&D sectors. Finally, the BSE Sensex gained 92.50 points or 0.54% to settle at 17,236.18, while S&P CNX Nifty gained 29.20 points or 0.56% to settle at 5,229.00.