Indian markets to get a positive start of the penultimate day of F&O expiry

The Indian markets despite getting good lead with RBI’s double bonanza slipped into red in the latter half of last session’s trade and lost over half a percent. There was caution in the markets after the Reserve Bank of India said that banks should ensure adequate loans to productive sectors as uncertainty due to non-performing loans are hurting the flow of money to needy sectors. Though, home, auto and corporate loans will become cheaper after Reserve Bank reduced the rates. Today, the start is likely to be somewhat positive and there might be an initial recovery on the penultimate day of the January F&O series expiry. Traders will be taking support from finance minister P Chidambaram’s statement that the government will present a “responsible” budget next month. Finance Minister has also said that government will cut fiscal and current account deficits to help economy return to the 8 percent growth path. The export oriented stocks are likely to get some upmove as Reserve Bank Governor D Subbarao expressing his worries over low share of export credit in the books of banks has constituted a technical advisory group to look for solutions to help the sector.

Earnings season is on full swing and there will be lots of important result announcements. Arvind, Balrampur Chini, Central Bank, Chambal Fertilizers, Colgate Palmolive, Delta Corp, Dena Bank, IOB, IPCA Lab, Merck, Power Finance, PVR and SJVN are among many to announce their numbers today.

The US markets made a good recovery in the last session supported by some good earnings numbers that led Dow near 14k mark and keeping the S&P above 1500 level.Traders embraced the good numbers of Pfizer, Tupperware, Beazer Homes and Eli Lilly, shrugging off the report that US consumer confidence fell to a fourteen-month low in January. Most of the Asian markets have made a positive start supported by report of an unexpected rise in industrial output of South Korea.

Back home, Tuesday turned out to be a disappointing session of trade for the Indian stock markets, as key equity benchmarks snapped the session with a cut of over half a percent as market participants resorted to profit booking after Reserve Bank of India (RBI) signaled that there were less room for aggressive cuts in future due to concerns over inflation. Though, both the frontline gauges re-conquered their crucial 6,100 (Nifty) and 20,100 (Sensex) levels after the RBI reduced its policy rate by a widely expected 25 basis points, taking comfort from cooling inflation as it made the first cut in nine months to support an economy headed for its slowest growth in a decade. Also, RBI unexpectedly reduced the cash reserve ratio (CRR), the share of deposits banks must keep with the central bank by 25 bps to 4.00 percent, which will infuse an additional Rs 18,000 crore into the banking system. But, both the domestic gauges failed to hold on to intraday gains and slipped in the negative territory on Tuesday as traders, who had already factored in a 25 basis points cut in the repo rate, booked profits near higher levels. Weakness in European counters too dampened sentiment, dragging Indian frontline indices below 6,050 (Nifty) and 20,000 (Sensex) levels. European markets traded mostly lower in the early deals. Back home, sentiments also remain subdued after the RBI lowered its growth projection for the Indian economy as new investment demand continues to remain muted. The banking regulator now expects the domestic gross domestic product (GDP) growth at 5.5% in the current financial year. It had earlier projected 6.5% growth in July, 2012. But lowered it to 5.8% three months later as investment demand slowed, consumption spending moderated and export performance eroded. Selling got intensified after rate sensitive counters like banking, realty and auto all turned into red after RBI despite lowering its key policy rate, struck a cautious note on further easing as it waits to see how the government controls its fiscal deficit. Finally, the BSE Sensex lost 112.45 points or 0.56% to settle at 19,990.90, while the S&P CNX Nifty declined by 24.90 points or 0.41% to end at 6,049.90.