Markets likely to get some recovery; to take direction from earnings

The Indian markets were butchered in last session after the RBI’s policy review left the traders high and dry with no repo cut announcements. Today, the start is likely to be in green and some recovery can be seen in early trade, now after the monetary policy investors will once again concentrate on the Q2 earnings which will give direction to the markets. Traders will now be expecting more measures from the government front, as the Finance Minister P. Chidambaram after RBI’s status quo stance has vowed to walk alone to face the challenge of growth. However, the rate sensitives’ are likely to remain in subdued mood after the RBI’s disappointment. The market may remain cautious as foreign direct investment (FDI) in India declined by about 20 percent to $2.26 billion in August compared to same month in the previous year. There will be some solace with a report that despite decline in Indian consumer confidence in Q3, it still remains most upbeat globally.

There will be lots of important result announcements to keep the markets buzzing. Aditya Birla Chemicals, Aptech, Bata India, Bayer Crop, Bharat Forge, Claris Lifesciences, Deepak Fertilizers, Gujarat Pipavav, J&K Bank, Jindal Stainless, Kalpataru Power, LIC Housing Finance, NHPC, Oracle Financials, Orient Paper, Power Grid Corp and Titan Inds are among many to announce their numbers today.

The US markets remained closed on Tuesday, unable to give any cues to the other global markets. The Asian markets have made a mixed start, though some indices have gathered gains of over half a percent supported by some good economic news from the region and as the BOJ increased its monetary stimulus for a second month running. South Korean industrial output increased and Taiwan’s economy resumed growth in the third quarter.

Back home, the Reserve Bank of India’s (RBI) quarterly monetary policy review day turned out to be a tumultuous one for the stock markets in India, which reversed their course immediately after the RBI’s policy decision came to the fore. The benchmark equity indices not only got ruthlessly slaughtered by about over one and a half percent from the high point of the day but also went on to undo all the good work done in the past months as Nifty end below 5,600 mark for the first time after September 20, 2012. The psychological 5,700 (Nifty) and 18,700 (Sensex) levels proved as stern resistances as the key gauges tumbled lower from those levels and the southbound journey only halted with the close of trade. The sentiments’ got spooked mainly after RBI in second quarter review of monetary policy 2012-13, left its key policy rates, viz. repo and reverse repo, unchanged at 8 percent and 7 percent respectively. By maintaining the repo rate, the central bank has reiterated its stance on inflation management since upside risks to inflation continue to persist. However, investors ignored RBI’s move to reduce the cash reserve ratio - the percentage of deposits banks keep with the Reserve Bank by 0.25 percent to infuse additional liquidity that will inject Rs 17,500 crore into the financial system. Meanwhile, banks, especially state-owned ones, were further hurt after the RBI increased the amount of provisioning against restructured assets for the sector to 2.75 percent from 2 percent, as part of its monetary policy review. Selling pressure aggravated as RBI also lowered economic growth estimate to 5.8 percent for 2012-13, from 6.5 percent projected earlier while, the forecast for inflation for March 2013 was raised to 7.5 percent, from 7.0 percent. Sentiments got dampened after most of the sectors got hammered badly during the trade. Major stress was witnessed among banking stocks, mainly the PSUs with the apex bank maintaining status quo on policy rates however, even other rate sensitives, viz. Auto and Realty witnessed nasty laceration. Moreover, tyre stocks accelerated amidst sluggish trade, after Competition Commission of India (CCI) gave a clean chit to the tyre manufacturing companies, which were off lately being probed for alleged cartelisation. Finally, the BSE Sensex shaved off 204.97 points or 1.10% to settle at 18,430.85, while the S&P CNX Nifty plunged by 67.70 points or 1.19% to end at 5,597.90.