Markets to get a positive start on supportive cues and rate cut hopes

The Indian markets plunged further in last session on global concerns and lacking any support from the domestic front. Today, the recovery wave of the region is likely to give the local markets a positive start, though traders will be eyeing the much awaited monetary policy review of the Reserve Bank of India (RBI), due later in the day. There is wide expectation that central bank in its last mid-quarter review of monetary policy for fiscal 2013, will announce a 25 basis points cut in repo rate. Markets may get a boost if RBI, in order to ease liquidity situation, reduces the cash reserve ratio by 25 bps too. There will be some support to the markets from Finance Minister P Chidambaram’s statement that the government is considering further liberalising foreign investment cap in various sectors. However, the private sector banks are likely to remain under pressure, as widening its probe into alleged money laundering by banks, the RBI has included sale of gold coins and wealth management operations in its scrutiny.   

The US markets continued their sluggish trade on Monday and major indices lost about another half a percent as a bailout agreement for Cyprus raised concerns about the Europe, while the unexpected drop in US homebuilder confidence in the month of March, too weighed on the sentiments. The Asian markets are showing signs of recovery; Japanese market has taken the lead as exporters gained after the yen weakened against the dollar, boosting their earnings outlook.

Indian equity indices extended their previous session’s southward journey with both the frontline gauges losing their crucial 5,850 (Nifty) and 19,300 (Sensex) levels on the back of feeble global cues. After a gap-down opening, market traded in the tight band throughout the session, as investors opted to remain on sidelines ahead of the Reserve Bank of India’s (RBI’s) policy announcement tomorrow. The markets never looked confident and traded below their crucial levels throughout the trade. Global cues played the major spoilsport as an unparalleled levy on bank deposits in Cyprus is likely to plunge Europe back into crisis. All the Asian equity indices shut shop in the red. Back home, sentiments remained somber after Global rating agency Moody’s said that India’s high food inflation is credit negative for the country as it hurts government finances and curtails the ability of the RBI to deal with monetary issues. Selling in banking stocks too was dampening the sentiments as scrips like, ICICI Bank, Axis Bank and HDFC Bank edged lower after finance ministry and the RBI started  investigating allegations of money laundering practices at these top private sector lenders. Additionally, shares of public sector oil marketing companies like BPCL, HPCL and IOC gone through the floor after Indian Oil Corporation slashed petrol price by Rs 2 per litre excluding VAT with effect from midnight of March 15, 2013, while there was no hike in diesel prices. Bucking the trend, sugar related stocks like Shree Renuka Sugar, Bajaj Hindusthan, Triveni Engineering Industries and Rana Sugars edged higher on report that the Union Cabinet is likely to meet on March 18, 2013, to consider partial decontrol of the sugar sector. Finally, the BSE Sensex lost 134.36 points or 0.69% to settle at 19293.20, while the CNX Nifty declined by 37.35 points or 0.64% to end at 5,835.25.