Markets to get a weak start on sluggish global cues

The Indian markets made a modest recovery on Friday after the clarification by the Finance Ministry on Tax Residency Certificate, but the traders remained largely on sidelines lacking any major cues. Today, the start is likely to remain cautious on sluggish global cues; there will be some sentiment boost with the finance minister’s promise that his Income Tax Department gumshoes won’t haunt overseas investors for revenues and may fuel some revival in stocks. Also, Finance Minister P. Chidambaram has said that a number of non-legislative decisions covering Customs, Excise, Service Tax, insurance and banking to promote growth will be announced in Parliament before the passage of the Finance Bill. However, cautiousness is likely to persist, as Reserve Bank of India's governor D Subbarao has said that India's growth story is still intact, with the potential to grow at double digit rates, provided some issues are addressed, as a mere 5-6 % growth is not sufficient. The PSU OMCs will be in action as there was some revision announced in diesel and LPG prices.

The US markets though made a close in green but the mood remained cautious, as the budget cuts became effective lacking any agreement among the congressional leaders. The Asian markets have mostly made a weak start and the Chinese and Hong Kong market have plunged as China tightened mortgage rules to cool the property market. Though, the Japanese market was one of the few that has added some strength on stimulus hopes after Haruhiko Kuroda, the Bank of Japan governor nominee, told parliament that he will do whatever it takes to end deflation.

Back home, key equity benchmarks, after witnessing the steep fall on Budget day, started the new F&O series on a positive note as traders kept them-self busy in buying beaten down fundamentally strong stocks. The markets showed some signs of recovery in mid morning trades after the brutal butchery in previous trading sessions owing to the disappointing federal budget, however, the psychological 5,750 (Nifty) and 19,000 (Sensex) levels proved to be stern resistance levels for the frontline indices as they failed to break those crucial points and dipped into the negative terrain. However, the key gauges found strong support around the crucial 5,700 (Nifty) and 18,900 (Sensex) levels on the downside and rebounded from those levels. Market participants were seen piling up positions largely across the board as they hunted for undervalued but fundamentally strong bargains after the recent sell-off. Markets gained further in the afternoon session after the Finance Ministry issued a clarification on Tax Residency Certificate (TRC). The government wishes to make it clear that Tax Residency Certificate produced by a resident of a contracting state will be accepted as evidence that he is a resident of that contracting state and the Income Tax Authorities in India will not go behind the TRC and question his resident status. However, global cues remained unsupportive as European counters traded lower in the early trade as sentiments got undermined by the looming budget cuts in the United States and Italy’s political stalemate. Back home, better-than-expected manufacturing activity in India provided some support to the markets. HSBC Markit manufacturing PMI rose to a seasonally adjusted annual rate of 54.2, from 53.2 in the preceding month. Benchmarks also got some boost from buying in public sector banking stocks like PNB, BOB, IDBI Bank and SBI after the Finance Minister said that the government will provide Rs 14,000 crore for capital infusion in public sector banks in FY 2014. Rally in PSU oil marketing companies too supported the sentiments. Stocks like BPCL, HPCL and IOC surged as US crude oil futures fell to the lowest level this year as manufacturing in China, the world’s second-biggest oil consumer slowed in February 2013. Some support also came in from buying in the software pack as stocks like Infosys, Wipro, Tech Mahindra and Mahindra Satyam gained after the Indian rupee fell to a six-week low against the US dollar on March 1, 2013. Finally, the BSE Sensex gained 56.98 points or 0.30% to settle at 18,918.52, while the CNX Nifty rose by 26.65 points or 0.47% to end at 5,719.70.