Markets to get a cautious start; may see some recovery in late trade

The Indian markets witnessed a bloodbath in the last session with major indices suffering a cut of around one and half a percent, losing many crucial support levels. Amid the fear of the Cyprus crisis, domestic political upheavals weighed on the sentiments. RBI’s much awaited rate cut went in vain on the concern of uncertainty in the government as,  the DMK led by M Karunanidhi, an ally of the Congress Party in the UPA government, decided to pull back its support. Today, the start is likely to be cautious, though some recovery can be expected once the trade stablises and the rate sensitives’ make make some upmove. However, the telecom stocks are likely to remain under pressure as Sunil Mittal, chairman of Bharti Airtel along with Asim Ghosh, the former head of Vodafone Group Plc's Indian unit, and Ravi Ruia of Essar Group have been summoned by a court hearing 2G case. In another development PMO has denied media reports alleging that it had analysed and agreed with former telecom minister A Raja’s actions before the 2G scam surfaced.  There will be buzz in the power sector too, as the Power Ministry has unveiled ratings programme for distribution utilities which would enable them to get loans at better interest rates based on their financial.   

The US markets mostly made a weak closing on Tuesday, though Dow once again managed to enter the green on upbeat housing data but traders weighed concerns about the situation in Cyprus. Meanwhile, Cyprus's parliament voted to reject a proposed European Union bailout plan that would tax bank deposits at a rate of up to 9.9 percent. The Asian markets have made a mixed start with some of the indices trading in red, though Chinese market has surged, boosting the sentiments in the region, as commodities rebounded and on report that Chinese regulators may allow more investors to partake in short selling and margin trading.

Back home, Tuesday turned out to be a daunting session of trade for the Indian stock markets, which extended the southbound journey for third consecutive day and gave up around one and a half percentage points. The frontline gauges after a positive start witnessed steep fall after M Karunanidhi led DMK Party decided to withdraw support to the UPA government over the Sri Lankan Tamil issue. However, market got some support near their crucial 19,000 (Sensex) and 5,750 (Nifty) levels after the Finance Minister assured that the ruling UPA government has absolute majority despite the DMK party withdrawing support. The disappointment also crept in after apex bank, in its effort to prop up the sagging growth of the economy, slashed repo rate by much anticipated 25 basis points to 7.5 per cent, but left CRR, key liquidity tool unchanged at 4%, which in turn led to sell-off in rate sensitive sectors. Sentiments also got dampen after RBI said that risks on account of the CAD remain significant notwithstanding likely improvement in Q4 over an expected sharp deterioration in Q3 of 2012-13. Accordingly, even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited. Sentiments also remain dampened after European counters fell for a second day on Tuesday as investors worried about the uncertainty over a bailout for Cyprus aimed at preventing a debt default and banking collapse. Back home, selling in banking stocks too dampened the sentiments after the central bank stated that the headroom for further monetary reduction remains quite restricted. Meanwhile, the private sector banks remained 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. Additionally, share price of sugar stocks like Balrampur Chini, Shree Renuka Sugar, Bajaj Hindusthan and Triveni Engineering all gone through the floor after the Cabinet Committee on Economic Affairs deferred the sugar decontrol proposal in absence of Finance Minister P Chidambaram, Defence Minister AK Antony and Health Minister Ghulam Nabi Azad. Finally, the BSE Sensex shaved off 285.10 points or 1.48% to settle at 19,008.10, while the CNX Nifty plunged by 89.30 points or 1.53% to end at 5,745.95.