Markets likely to extend the somberness with a mildly soft start

The Indian markets were butchered in last session with benchmarks slipping below their crucial support levels. There was across the board selling after dismal GDP data. Today, the start is likely to be soft-to-cautious and traders are likely to remain under pressure on weak global cues. On the domestic front too there is a discouraging report, as despite many efforts of the government, FDI inflows registered 38 percent decline to $22.42 billion in 2012-13 compared to the previous year. There will be buzz in the PSU oil marketing companies as they raised petrol and diesel prices from June 1, on the same time there will be some relief for the aviation stocks as the ATF prices have been reduced. Pharma sector too is likely to remain in action, as the commerce ministry’s nodal agency for foreign direct investment policy has sent a formal communication to the finance ministry asking it not to clear FDI proposals in pharmaceutical sector after the Foreign Investment Promotion Board (FIPB) declined its informal request to do so.

The US markets suffered sharp cuts on Friday, though there were mixed set of economic numbers but traders were concerned about Fed tapering down its stimulus program soon. The Asian markets have made a weak start with Japanese market leading the pack, down by over two percent as capital spending fell 5.2 percent in the first quarter from a year ago. Chinese market too dropped in early trade despite official manufacturing index data released June 1 showing a pickup in growth.

Back home, stock markets in India kick started the new F&O series on a daunting note with the benchmark equity indices getting pummeled by over two percent on Friday. The domestic benchmarks traded in a narrow range for most part of morning trades but a sharp wave of selling pressure, which emerged in noon deals, dragged the key gauges below their crucial 6,000 (Nifty) and 19,800 (Sensex) levels. Markets southbound journey only came to a halt with the close of trade as sentiments remained uninspiring right from the beginning of trade. The downfall was largely transpired due to brutal selling in rate sensitive counters like, realty and banking after economic growth data came in line with expectations, dashing hopes that the RBI would cut interest rates next month. GDP for fourth quarter grew at 4.8 per cent against revised 4.7 per cent in previous quarter. India’s GDP for FY13 grew at 5 per cent, lowest in a decade, versus 6.2 per cent, year-on-year (y-o-y). Further, Reserve Bank of India governor’s comment that inflation still remains high and it will take into account the current account deficit for policy decisions also weighed on market sentiment. Meanwhile, investors shrugged off better than expected FY13 fiscal deficit data which came in lower at 4.89 per cent against budget estimate of 5.2 per cent, on account of higher non-tax revenue, which were up by Rs 8,000-10,000 crore. Meanwhile, FY13 revenue deficit came at 3.6 per cent against budget estimate of 3.9 per cent. Selling got intensified after European markets made weak opening as investors continued to contemplate as to the timeline of the US Federal Reserve’s potential pruning of its massive global asset buys. Back home, depreciation in Indian rupee too remained the major reason for downfall in markets. The rupee was seen continuously weakening against the US dollar due to increased dollar demand in the local market. Stocks from Metal space also edged lower as the International Monetary Fund (IMF) recently cut its growth forecast for China this year citing a weak world economy and exports, adding to concerns that the world’s second-largest economy is losing momentum. Finally, the BSE Sensex shaved off 455.10 points or 2.25% to settle at 19,760.30, while the CNX Nifty plunged by 138.10 points or 2.26% to end at 5,985.95.