Consolidation of Indian markets may linger ahead of the ECB policy decision

The Indian equity markets took a breather in last session after rallying in previous three days, though managing to close in green after a choppy trade. Manufacturing activities growing at the slowest pace in last eight month weighed on the sentiments, while there was cautiousness ahead of the important policy decision of the US Fed and ECB, the traders opted to remain on sideline, not opening any fresh positions. Today, the start is likely to remain cautious and till the ECB’s meeting outcome, the traders will prefer to go slow. There are some good news from the economy front, for the quarter ended June, the trade deficit narrowed to $40.05 billion from $46.23 billion in the corresponding period last year. The trade deficit for June too fell to $10.31 billion from $14.4 billion in June 2011. exports fell 5.5% to $25 billion in June, compared with $26.5 billion in the corresponding month last year, while Imports declined by 13.5% to $35.4 billion, compared with $40.9 billion in June 2011.The telecom stocks too are likely to keep buzzing as the telecom ministry has proposed the existing slab rate system of revenue sharing for spectrum usage charge to the cabinet, which if accepted, will help new entrants in the form of lower levy. The banking stocks too may see some action after country's largest lender SBI has decided to cut car and home loans. SBI has said that it will bring down interest rates on car loans to 10.75% from the prevailing 11.25%, while it decided to offer home loans of up to Rs 30 lakh at 10.25% down from 10.5%, and loans between Rs 30 lakh to Rs 75 lakh at 10.4%.

Apart from this, there will be lots of important result announcements. 3I Infotech, Berger Paints, Cummins India, Glenmark Pharma, Oracle Financials, Shasun Pharma and Satyam Computers etc. will be among many to announce their numbers.

The US markets continued their declining streak for the third straight day and all the major indices lost close to a quarter percent, as there were no significant monetary policy changes announced by Federal Reserve after its two days meeting. It rather said that it would continue to monitor economic data and would provide additional accommodation as needed. The Asian markets have made a mixed start with some of the indices showing cut of quarter to half a percent. Though, US Fed did not came up with any major changes but assured that it will pump fresh stimulus if necessary, traders were now hopeful that the European Central Bank will do more to contain the debt crisis. Gain in commodity was supporting the Japanese markets, which was leading the Asian pack with gain of about half a percent.

Back home, Indian benchmark equity indices, after vehemently surging over three and half a percent in the previous three sessions, went for consolidation on Wednesday’s trade by settling just above the pre-close level. It turned out to be a range-bound session for the frontline indices, which somehow managed to cling on to the levels reached on Tuesday as investors at large chose to play the waiting game ahead of a series of developments from global front, which will pave the way forward for the local bourses. All eyes would be on the outcome of the US Fed meeting that would conclude today as well as on the ECB meeting scheduled tomorrow i.e. August 2.  On the domestic front, the market-men remained hopeful for some form of action in terms of reforms or diesel price hike after the Cabinet reshuffle. P Chidambaram has been appointed as the new Finance Minister. He took over the portfolio from Prime Minister Manmohan Singh who had been holding temporary charge after Pranab Mukherjee while, Sushil Kumar Shinde will now be the new Home Minister and Veerappa Moily will hold additional charge of power. On the sectoral front, healthcare pack remained the top gainer led by Cipla, up by 4.50% which reported better than expected Q1 numbers. The company reported a surge of 58.19% in its net profit at Rs 400.76 crore for the quarter, while its total income increased by 23.85% to Rs 2011.25 crore. Cipla’s strong Q1 results sparked rally in some other pharma stocks. Sun Pharmaceuticals Industries and Wockhardt hit record highs. On the flip side, Metal space lost about 0.70% following fall in base-metals prices on the London Metal Exchange. Nevertheless, the gains remained capped after the HSBC purchasing managers’ index (PMI), a headline index designed to measure the overall health of the manufacturing sector, expanded at the slowest pace in the past eight months to 52.9 in July, 2012 as against 55.0 in the previous month of 2012. However, a figure above 50 signals increase in production while, a number below 50 indicates contraction. The BSE Sensex gained 21.20 points or 0.12% to settle at 17,257.38, while the S&P CNX Nifty rose by 11.50 points or 0.22% to close at 5,240.50.