Indian markets to get a bounce back on supportive regional cues

The Indian equity markets got a halt to their winning momentum on political jitters and sluggish global setup in last session, traders turned cautious with sense of instability of the government at the centre. Today, the start is likely to be in green and a small bounce back is expected in the early trade on supportive global cues. The aviation and retail stocks are likely to be buzzing as the government, despite widespread protest and nationwide bandh has notified all the decision taken last week, related to FDI in retail and aviation sectors and permitting greater foreign investment in some sections of the broadcasting sector. The oil marketing companies too are likely to remain in focus today, as there is buzz that the government may go for giving some relief in diesel too after in a move to placate resentment related to cap on LPG cylinders, Congress ruled states were asked to increase the number of subsidised cylinders from six to nine per family in a year. However, credit rating agency Moody’s has said that any such step would limit government’s subsidy reduction plan.

The US markets made a mixed closing on Thursday, there were some weak economic reports that took investors attention, US manufacturing closed out its weakest quarter in three years in the month of August and the number of Americans filing new claims for jobless benefits held near two-month highs last week. The Asian markets have made an all green start, supported by the gains in the commodity stocks; however data from China and Europe to the US raised concern about global growth. Japanese market has recovered after yesterday falling the most in three weeks on the back of gain in defensive shares.

Back home, Thursday turned out to be a daunting session of trade for the Indian stock markets, which extended the southbound journey after a day’s break on Thursday and gave up around a percentage points. The frontline gauges remained choppy through the day and drifted to lowest point in the session in the last leg of trade as political jitters dampened the sentiments after Trinamool Congress chief Mamata Banerjee decided to withdraw support from United Progressive Alliance (UPA) government on the issue of diesel price hike and FDI in retail, as the government ruled out any rollback. The government now has to depend on outside support for survival and that may make the reform era difficult to progress further. Meanwhile, industry body FICCI, lauding the recent economic reform measures by the government has appealed to political parties to set aside their differences and support the government in its move. Domestic markets, after a sedate opening, gained some strength in late morning trade paring some losses on hopes that the government may get support from Samajwadi party (SP) and Bahujan Samaj party (BSP) to stay in power. Moreover, public sector oil marketing companies too provided some strength to the markets as shares of companies like BPCL, HPCL and IOC all edged higher on the back of continuously fall in international crude prices. But, widespread selling pulled the indices lower and they closed near the lowest point of the day. Sentiment also remained gloomy as rupee fell to its lowest in nearly a week on Thursday as a key ally of the country's ruling coalition withdrew its support. Selling in Metal space too dampened the sentiments as stocks like Sterlite Industries, Bhushan Steel, JSW Steel, Tata Steel, Sail and Hindalco Industries edged lower following fall in global metal prices. Selling pressure was also witnessed in Capital goods stocks, which declined by about two percent on BSE sectoral front on profit booking after a recent rally. However, on the positive side, IT shares gained strength during the trade after Indian rupee depreciated to a week’s low level in early deals on Thursday tracing the sluggish local equities after Trinamool Congress withdrew its support in protest against the government. Moreover, FMGG stocks too aided sentiments as monsoon rainfall in India remained 44% above average. Finally, the BSE Sensex lost 146.76 points or 0.79% to settle at 18,349.25, while the S&P CNX Nifty declined by 45.80 points or 0.82% to close at 5,554.25.