Markets to get a cautious start, RBI’s policy review eyed

The Indian markets made a choppy start of the F&O expiry week and ended on a flat note in last session.Today, is a crucial day for the markets with all eyes on the Reserve Bank of India’s (RBI) policy decision. Though there is consensus that RBI will go for a 25 basis points repo rate cut but it has warned of a suppressed inflation in its macro-economic report saying that economic growth could fall to 5.5 percent this fiscal before seeing a gradual recovery next year. It has said that more reforms are required, especially in road and power sectors, to remove the investment bottlenecks. The apex bank has further stated that recent reforms have reduced the immediate risks for the economy but emphasised on the need for more measures to restore investor confidence. Meanwhile, traders are also likely to rejoice the news that going a step further, states have agreed to the compensation formula suggested by the Centre for their CST (Central Sales Tax) revenue loss for implementing the Goods and Services Tax (GST). States will be given 100 per cent compensation of their claims for 2010-11, 75 per cent for 2011-12 and 50 per cent for 2012-13.

Also, there will be lots of important result announcements to keep the markets buzzing. Alstom T&D, Century Textile, Crompton Greaves, Dabur India, Engineers India, Glenmark Pharma, Idea Cellular, L&T Finance Holdings, NOCIL, Oracle Financials, Reliance Capital, Sterlite Inds, Torrent Pharma and Zee News are among the many to announce their numbers today.

The US markets ended on a mixed note as traders turned cautious after the mixed economic reports, while there was a bigger than expected increase in durable goods orders, then a separate report showed a sharp drop in pending home sales. Most of the Asian markets have made a positive start supported by the report of rise in business confidence in South Korea and Australia. Japanese market too was trading higher despite the yen gaining against most of its peers.

Back home, the January series F&O contract expiry week got off to a quiet start as the benchmark equity indices, after witnessing rally of about a percentage point in previous session, snapped the volatile day of trade on an absolute flat note on Monday as investors remained on sidelines ahead of the Reserve Bank of India’s (RBI) third-quarter policy review on January 29. Though, markets opened on an optimistic note with both the frontline indices hitting their highest level in more than two years supported by buying in rate sensitive counters amid hopes that that the central bank will cut interest rates to boost growth into Asia’s third-biggest economy. Some strength came in from FICCI’s prediction that the economy will grow by 6.7 per cent for 2013-14. The chamber has revised its growth forecast upwards from 6.5 percent to 6.7 percent for the next fiscal. Supportive cues from US markets provided the much needed support to local markets in first half. Investors’ morale got buttressed on the back of robust US earnings in the fourth quarter coupled with rise in Germany’s business confidence flaring hopes that Europe’s largest economy is gathering momentum. Back home, some cautiousness also came in from currency markets as Indian rupee depreciated by 21 paise to 53.88 against the dollar in early noon trade on the Interbank Foreign Exchange on fresh demand for the US currency. Some pressure was also witnessed in the oil and gas sector stocks despite the Union Minister for Petroleum and Natural Gas M Veerappa Moily saying that his ministry will soon bring in a Uniform Gas Price Policy. But, recovery was seen in the last leg of trade as up-move in metal counters boosted investors confidence as stocks like JSW Steel, SAIL, Sterlite Industries, National Aluminium Company and Hindalco all edged higher as manufacturing surveys out from China, Europe and the US on January 24, 2013 pointed to an improvement in the global economy. Rally in Railways shares too aided the sentiments as Kernex Microsystems (India), Titagarh Wagons, Kalindee Rail Nirman (Engineers) and Stone India all edged higher after Railway Ministry constituted a committee to study and suggest revision of tariff and menu of standard meals in premier and other mail and Express trains. The software and technology stocks too traded with traction as the rupee turned weak against dollar owing to the month end dollar demand from the importers. Finally, the BSE Sensex lost 0.18 points to settle at 20,103.35, while the S&P CNX Nifty rose by 0.15 points to end at 6,074.80.