Market to make a cautious start, IIP and Infosys numbers to give direction

The Indian equity markets lost their momentum in second half on some economic worries and ended flat in last session. Trade also turned cautious ahead of the IIP data and start of official earnings season. Today, the start is likely to be cautious and traders will watch for the IIP numbers to get direction, some analysts are of the view that the industrial production for the month of November may contract by 1-1.5 per cent largely owing to post-Diwali base effect, after jumping 8.2 per cent in last month. There will be buzz in the IT sector as IT bellwether Infosys will be announcing its third quarter numbers; the company is likely to report a decline in its net profit numbers, while the topline too seems to be impacted by the gloomy global economic scenario. The PSU banking stocks are likely to remain in upbeat mood after the Union cabinet yesterday approved a proposal to infuse Rs 12,517 crore into 10 public sector banks to help them increase lending activity and meet capital adequacy norms. The PSU stocks too are likely to remain buzzing as Union Cabinet has approved a proposal to offload 10% stake in staterun Engineers India (EIL) which is expected to raise Rs 800 crore. 

The US markets added strength on Thursday mainly on the back of upbeat data from the overseas, there was mixed economic reports as the number of people filing for initial jobless claims rose while, the wholesale inventories rose 0.6% in November, which was higher than expected. The Asian markets have made mostly a positive start, though some of the indices are trading marginally in red too. Japanese market has surged after the Cabinet approved 10.3 trillion yen of economic stimulus measures.

Back home, reversing all the initial gains, key domestic benchmarks witnessed consolidation on Thursday with both the gauges snapping the session on a flat note with negative bias as investors booked profit ahead of the Infosys’ third quarter performance which is likely to set the tone of earnings season for the Oct-Dec quarter. Infosys, the bellwether stock of Information Technology index, will announce its third quarter performance on Jan 11 amid fear that software maker may cut its revenue guidance for the fiscal year. The bourses traded in fine fettle during the first half buoyed by firm global cues. But, investors turned nervous on Prime Minister Manmohan Singh’s comment that the high international price of oil was putting a big strain on the economy and effort should be made for reducing the transport sector’s dependence on oil. Supportive cues from US markets provided the much needed support to local markets in first half. Investors’ morale got buttressed after most of the Asian markets shut shop in the green on the back of better-than-expected Chinese trade data. The nation’s exports rose 14.1 percent in December from a year earlier compared to a markets expectation of closer to 4 percent while imports gained 6 percent indicating stronger domestic demand. However, disappointing cues from European market took their toll on domestic sentiments in second half and dragged the frontline gauges below the psychological 6,000 (Nifty) and 19,700 (Sensex) levels. Cautiousness in the markets crept in after HSBC slashed India’s growth forecast for this fiscal year and next fiscal to 5.2% and 6.2% from 5.7% and 6.9% respective. In its report, HSBC also underscored more time for reforms process and another three years for Indian economy to return to 8% growth on a sustained basis. However, the benchmark indices pared almost all of their losses in late trade after government’s announcement that public sector banks, reeling under asset quality issues, be re-capitalized. After a crucial meet of Cabinet Committee on Economic Affair, finance minister P Chidambaram reported that about 9-10 banks will be infused with Rs 12,200 crore. Finally, the BSE Sensex lost 3.04 points or 0.02% to settle at 19,663.55, while the S&P CNX Nifty declined by 2.85 points or 0.05% to end at 5,968.65.