Markets likely to get a cautious start ahead of RBI’s policy review

The Indian markets managed a flat but positive close in last session, the trade suddenly turned volatile in second half and traders cautious with the Finance Minister P Chidambaram rolling out a fiscal consolidation road map a day ahead of the RBI’s policy review. Today, the start is likely to be on a flat note and the traders will be eyeing the monetary policy review that is forecast to hold interest rates. However, in its review of macroeconomic and monetary developments for the July-September quarter, released a day ahead of the second quarter policy review, RBI said the monetary policy might respond more effectively to growth concerns. However, another section of traders are of view that the inflation concern may prevent the Reserve Bank of India from cutting key policy rates to complement the Government's recent economic reform efforts. The oil sector is likely to remain buzzing as the newly appointed petroleum minister M Veerappa Moily said that oil ministry will speed up decisions and create conditions to attract a potential $50-billion investments. Power and Steel ministries too are likely to be in limelight as they are holding consultations with Crisil on its draft report on fixing reserve prices for 54 coal blocks to be allocated through competitive bidding route.

There will be lots of result announcements to keep the markets buzzing. Ballarpur Inds, Biocon, Dr Reddys Lab, Engineers India, Glenmark Pharma, IDBI Bank, JK Tyre, Maruti Suzuki, Mcleod Russel, Pidilite Inds, Satyam Computers (Mahindra Satyam), SJVN, Tata Teleservices, Thermax etc are among many to announce their numbers today.

The US markets remained closed on Monday and will remain closed on Tuesday as well in a safety precaution of Hurricane Sandy, which may become the worst to hit the US Northeast in 100 years. It’s for the first time since the Great Blizzard of 1888 that US stock markets will be closed for two consecutive days due to weather. The Asian markets have made a mixed start with some of the indices marginally trading in red. Japanese market was trading higher on hopes of more stimulus, as the country’s industrial production fell more than forecast, now all eyes are on central bank which will decides whether to ease for the second time in two months.

Back home, Indian equity benchmarks, after trading graciously in first half, snapped the volatile session on a flat note.  The frontline indices ended the session tad above their pre-close level as investors remained cautious ahead of RBI’s policy review on Oct 30. There is a general expectation that the apex bank in order to ease the liquidity conditions will cut cash reserve ratio (CRR) in its monetary policy review and would maintain the key policy rate at the existing levels. The gauges kick started the session on upbeat note as investors kept themselves busy in piling-up positions in equities following the reshuffle of cabinet ministers on October 28. In the biggest reshuffle of the Congress-led United Progressive Alliance Cabinet, Manmohan Singh inducted 17 new faces and a total of 22 ministers giving several new and young faces a chance to prove their mettle. But, in the second half, markets pared entire gains as market-men opted cautious approach after finance minister’s fiscal consolidation roadmap proved as non event as nothing out of the blue was announced. The FM stated that government has accepted recommendations of the Kelkar Committee on fiscal consolidation and the fiscal deficit would be 5.3% in 2012-13, higher than the budgeted fiscal deficit for the current fiscal at 5.1 percent of GDP. Depreciation in Indian rupee against dollar too dampened the sentiments. The Indian rupee lost 47 paise to 54.03 against the US dollar at the time of closing of equity markets. Cues from global front too dampened the sentiments as European markets exhibited dead beat in the early session following a string of disappointing corporate earnings last week and a bleak outlook. Back home, the major amount of blow came in from capital goods pack which tumbled over one and a half percent after the sectoral heavyweight BHEL dipped 6 percent on reporting a lower-than-expected net profit of Rs 1,274 crore as compared to analyst estimates of around Rs 1,418 crore for the second quarter ended September 2012 (Q2). Net sales also grew marginally at Rs 10,400 crore from Rs 10,299 crore for the corresponding period in the previous year. However, market got some strength in late trade and both the bourses recouped their losses supported by Oil and gas sector, which remained the top gainer, garnering over half a percent gain on hopes for improved relationship with the government after the appointment of Veerappa Moily as the new Petroleum and Natural Gas Minister on Oct 28. Finally, the BSE Sensex gained 10.48 points or 0.06% to settle at 18,635.82, while the S&P CNX Nifty rose by 1.30 points or 0.02% to end at 5,665.60.