Weakness to persist; soft start on cards for the markets

The Indian markets despite some recovery in final moments, could not recover from their fall of the second half and ended modestly down in the last session. Today, the start is likely to remain somber tailing sluggish global cues. Global ratings agency Fitch has said that its ratings assessment on the country would depend upon execution of policy reforms announced recently by the government. Today, there will be some buzz in FMCG sector as the Commerce Ministry has notified the government’s decision that export of processed food items such as wheat flour, butter, cheese and oats will not be banned even though shipments of basic items are not allowed.Meanwhile, the power sector too is likely to remain buzzing as Union Cabinet is likely to approve the imposition of a ‘presidential directive’ on Coal India for implementing the price pooling of domestic and imported coal for supplies to the country's power stations. On the same time strengthening of rupee may weigh on the IT pack.

Also, there will be lots of result announcements to keep the markets ticking. Ballarpur Inds, Carborundum Universal, GTL, Jindal Stainless, NHPC, Phillips Carbon, Uco Bank, United Bank, United Brew Hldg and Wheels India are among the many to announce their numbers today.

The US markets suffered sharp profit booking on Monday and the major indices lost 1-1.5 percent for the day. Though, the economic news were good and there was a notable increase in factory orders in December but apart from profit booking, uncertainty about the political situation in Europe too led the markets lower. Most of the Asian markets have made a weak start and some are even down by over a percent in early trade on European concerns, Spanish Premier Mariano Rajoy faces opposition calls to resign.

Back home, First day of the new weak was an extension to the disappointing performance for the stock markets in India as the benchmark equity indices failed to extend their initial gain and settled the session in the red. The frontline equity indices traded on a sanguine note for the most part of the day on improved risk-appetite after jobs and manufacturing data showed mild recovery in US. The frontline gauges even looked set to breach the psychological 19,900 (Sensex) and 6,050 (Nifty) levels in the session as investors continued to show across the board buying interest. Supportive cues from US markets provided the much needed support to local markets in first half. However, disappointing cues from European market took their toll on domestic sentiments in late trade and dragged the frontline gauges below the psychological 6,000 (Nifty) and 19,800 (Sensex) levels. Investors mainly resorted to profit booking following the decline in European markets. Back home, market participants expressed disappointment over the new draft guidelines announced by RBI for restructured loans which are likely to hit earnings of banks by at least 3-8 per cent over the next two years, as banks would need to step up provisioning on restructured loans by 1 per cent from FY’14 to 3.75 per cent and to 5 per cent by FY’15 on the existing stock of restructured loans. In other development it has been reported that differences have cropped up between the Reserve Bank and the finance ministry over the guidelines for new banking licences, which are likely to be announced within the next fortnight. Market-men also remained little cautious ahead of advanced economic growth estimates for the current fiscal year (FY13) which will be released on Thursday. However, losses remained capped as some amount of support came in from Auto sector, garnering over half a percent, after Auto companies like Hero MotoCorp, Ashok Leyland, M&M, Tata Motors and Bajaj Auto reported better sales number in January 2013. Finally, the BSE Sensex lost 30.00 points or 0.15% to settle at 19751.19, while the S&P CNX Nifty declined by 11.65 points or 0.19% to end at 5,987.25.