Indian markets to get a cautious-to-soft start tailing weak global cues

The Indian markets surged on Tuesday despite some political jitters and before going for a holiday. Traders rejoiced the Finance Minister P Chidambaram’s decision of relaxing norms of tax residency certificate and cut in the rate of withholding tax on interest payments on government and corporate bonds to 5% from 20%. Today, the start is likely to remain cautious as the global cues are not supportive, though there will be some encouragement in the market a day ahead of the RBI’s monetary policy review as the Supreme Court  has upheld the constitutional validity of government’s decision of allowing 51% foreign direct investment in the multi-brand retail sector. However, there will be some somberness in the fertilizer stocks as the government in its bid to rein in fiscal deficit has decided to cut the subsidies on phosphate and potash-based fertilisers in the fiscal year that began in April. Traders will be eyeing the HSBC India Manufacturing PMI data, to be announced later in the day to gauge the pace of growth of manufacturing. PMI has fallen to its slowest in 16 months in March.

Traders will also be eyeing some important result announcements including, Bharti Airtel, Alembic Pharma, Andhra Bank, Canara Bank, Kotak Mahindra Bank, Oriental Bank and Syndicate Bank.

The US markets tanked on Wednesday on getting a disappointing batch of economic data. Payroll processor ADP reported that private sector employment increased by much less than expected in the month of April. At the same time ISM manufacturing index too fell in the month of April. Most of the Asian markets have made a soft start tailing the weakness in the US markets. The Chinese market was trading lower after the final HSBC Purchasing Managers’ Index dropped to 50.4 in April from March's 51.6, while the Japanese market was down as the yen rose, curbing the earnings outlook for Japanese exporters.

Back home, Indian equity markets ended near one and a half month high despite a very volatile trade on Tuesday. The benchmarks started on a positive note similar to the previous session and after surging in the early trade, succumbed to profit booking in the noon, slipping into the red terrain. Though, it followed many recovery bouts that helped the benchmarks close in green with Sensex surpassing its crucial 19,500 bastion. Gains in the domestic markets came mainly on the back of positive global cues coupled with strength in FMCG names like Hindustan Unilever and ITC after Unilever Plc, the parent of Hindustan Unilever said it would make an open offer for an additional 22.52% stake in the company at Rs 600 per share. Some strength also came in after the industry body CII said that reforms in governance as well as innovation across businesses is needed to bring the slowdown-hit economy back to higher growth rate trajectory. However, sustained profit-booking by investors in noon deals pulled benchmarks back to negative zone after the Supreme Court said that sharing information by the Central Bureau of Investigation (CBI) with the government on coal block allocation scam has shaken the entire process. But, recovery was seen in the late trade as traders got some relief after Finance Bill and demands for grants for various ministries was passed without debate after opposition walkout. Global cues too remained supportive as Asian stock indices ended mostly higher amid hopes of aggressive monetary policy easing by the European Central Bank and US Federal Reserve to stimulate global growth. Back home, the up-move was also supported by the Chief Economic Advisor, Raghuram Rajan’s statement that Current Account Deficit (CAD) in the fourth quarter (Jan-March) 2012-13 would be below 4%. He also said that for the full financial year, 2013-14 it is likely to be below 5%. Meanwhile, stocks of Aviation sector viz. Jet Air India and Spicejet remained on the buyers’ radar as the civil aviation ministry allowed domestic airlines to unbundle services such as carrying check-in baggage, serving meals and allotting preferential seats, and charge separately for them. Finally, the BSE Sensex gained 116.68 points or 0.60% to settle at 19,504.18, while the CNX Nifty rose by 26.10 points or 0.44% to end at 5,930.20. Indian markets remained closed on Wednesday on account of a public holiday.