Market mood likely to remain cautious ahead of vote on FDI in retail

The Indian markets after moving back and forth managed a positive close in last session. Traders remained on sidelines with the FDI in retail debate going on in Parliament. Today, the mood is likely to remain cautious as after heated debate in the Lok Sabha, the government’s decision to allow foreign direct investment or FDI in multi-brand retail, the major reform policy will be put to vote. Also there will be buzz in the banking sector, as the global rating agency Moody's has said that the country's stressed banking system continued to have a negative outlook and that the burgeoning fiscal and current account deficits were a matter of concern. However, the ailing airline sector is likely to be relieved as Civil Aviation Minister Ajit Singh said that the government is going to regulate airfares and only intends to make the pricing mechanism more transparent. The minister also said that he has urged the petroleum minister to bring in more transparency in fixing aviation turbine fuel (ATF) rates. While, there will be buzz across India Inc. as corporate India has sought tax breaks on their spending towards Corporate Social Responsibility.

The US markets closed marginally lower on Tuesday, traders remained concerned about the "fiscal cliff", which gave little reason to act and the volume remained low. Without action by Congress, approximately $600 billion in automatic tax increase and government spending cuts are due to go into effect at the end of the year. The Asian markets have started mostly in green with Chinese market taking the lead, surging by around two percent in early trade. However, there was some concern too in the region after Australian economic growth slowed to 0.5 percent in the third quarter compared to the previous quarter.

Back home, the Indian equity markets remained cautious throughout the session on the politically crucial day. A hot debate was going on in the parliament on the issue of allowing FDI in retail, though the government remained confident of getting through it successfully but the traders remained in wait and watch position, waiting for the vote to finally be over. Parliamentary affairs minister Kamal Nath exuded his confidence before the debate in Lok Sabha and also said that the government would get the amendments to the Foreign Exchange Management Act (FEMA), required to facilitate FDI in multi-brand retail, passed in both houses, if needed. On the other hand, leader of opposition BJP Sushma Swaraj said that manufacturing sector will witness maximum unemployment due to FDI. Back on street, there was complete inactiveness and the benchmarks traded in a tight range, with hardly any trigger to move the markets in either direction. Though, the cautiousness got doubled with global ratings agency Fitch warning that a loosening in fiscal policy ahead of the 2014 elections could further weaken India's public finances and fiscal slippages in the run-up to 2014 general elections along with declining growth could result in India's rating downgraded to below the investment level. The global markets too remained unsupportive, while the US markets ended lower on weak manufacturing data, the Asian markets made a mixed closing. Back home, the trade remained lackluster and consolidation lingered for the second straight day. Though, the outcome of the discussion is more or less priced in and there is no knee-jerk reaction expected but still traders remained on side lines, retail stocks such as Pantaloon Retail reversed gains once debate started in the Lok Sabha. Market-men were slightly encouraged by the finance ministry’s assertion to global rating agency Moody's that the government is committed to restricting fiscal deficit to 5.3 per cent of GDP this fiscal and has adequate cash balance to deal with the situation. On the sectoral front, though realty maintained its lead for yet another day but oil & gas piped it last to emerge as the top gainer of the day after the market heavy weight Reliance Industries surged by over 2% on report that the oil ministry is set to approve the company's investment plans for the controversial KG-D6 block, in its bid to reverse the sharp decline in output by developing new fields. Power sector too remained in limelight, while the drag in consumer durables, IT and Auto stocks kept the markets near the neutral level. Finally, the BSE Sensex gained 42.80 points or 0.22% to settle at 19,348.12, while the S&P CNX Nifty rose by 18.30 points or 0.31% to end at 5,889.25.