Markets to make a cautious start; sugar stocks to be in the limelight

The Indian markets plunged in the last session on worries of political uncertainty and lacking any supportive cue, though the global markets remained mostly sanguine but the internal worries led the fall in the domestic markets. There has been continuous selling pressure from the FIIs in the last couple of days getting jittery about their returns. Today, the start is likely to remain cautious, though some recovery can be expected after the sharp cuts witnessed in last two sessions. Markets, especially the sugar stocks are likely to get advantage with the Cabinet Committee on Economic Affairs clearing partial decontrol of sugar by abolishing the requirement for private sugar mills to sell a specified amount of sugar to the government at concessional rates. Meanwhile, the Reserve Bank of India (RBI) Governor D Subbarao has said that price stability was necessary for ensuring sustainable growth in the long term. On the other hand, bankers have asked the RBI to trim both the repo rate and the cash reserve ratio in its annual monetary policy that will be announced on May 3. Auto stocks too may see some action, as the Heavy Industries Minister Praful Patel has demanded withdrawal of additional duty on SUVs.   

The US markets despite a choppy session managed a green close, helped by the new Japanese monetary policy, however the gains were capped by the disappointing jobs data, as the Labor Department reported an unexpected increase in initial jobless claims. The Asian markets have made a mixed start, though the Japanese market has rallied, surging towards the five years high on unprecedented monetary easing announced by Bank of Japan, which include doubling monthly Japanese government bond purchases, lengthening the maturity of bonds and replacing the main operating target of the overnight call rate with a monetary base target.

Back home, bloodbath continued for second consecutive session at Dalal Street with both the frontline indices tumbling below their crucial 5,600 (Nifty) and 18,550 (Sensex) levels to hit the lowest level since November 21, 2012. Risk appetite turned sour on the back of heavy selling by exchange traded funds in the cash and futures market segment. Investors reacted negatively on data showing that foreign funds remained net sellers of Indian stocks on April 3, 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 368.39 crore on April 3. Continued political uncertainty on the domestic front and worries about early elections after the withdrawal of a key regional ally from the ruling coalition last month mainly weighed on investors’ sentiment. Cautiousness also crept in after capital market regulator SEBI voiced concerns over an alarming rise in grey market investments with thousands of crore being raised through illegal means. Global risk appetite also remained frail after weak economic reports on hiring and service industry growth in the US fuelled concerns over growth recovery in the world’s biggest economy. Back home, downfall continued as selling in software pack too dampened the sentiments as stocks like Infosys, TCS, Wipro and HCL Technologies edged lower on negative economic data in the US which is the biggest outsourcing market for the Indian IT firms. Banking stocks too butchered badly as Indian banks’ advances grew at a slower pace in 2012-13 compared with a year earlier, and fell short of the central bank’s projection, hurt by lower demand for credit from companies in a slowing economy. Bucking the trend sugar manufacturers viz. Bajaj Hindustan, Shree Renuka Sugars, Balrampur Chini Mills, Rana Sugar and Dhampur Sugar Mills edged higher on hopes that government will discuss the much-awaited measure to abolish the levy-sugar mechanism, under which private millers are required to sell a specified amount of the sweetener to the government at concessional rates. Finally, the BSE Sensex shaved off 291.94 points or 1.55% to settle at 18,509.70, while the CNX Nifty plunged by 98.15 points or 1.73% to end at 5,574.75.