Markets likely to get a cautious start, recovery can be expected in late trade

Monday was not a different day for the Indian markets as they lost another over half a percent for the day on economic worries. Today, the start is likely to remain cautious though some recovery can be expected in late trade. There will be some buzz in the markets as the government has sought to plug a loophole in the foreign direct investment (FDI) policy by clearly stipulating what a group company is, the move will prompt wholesale cash-and carry players to diversify their vendor base in the country. The banking sector and all the new banking licence aspirants are likely to remain in action after the Reserve Bank of India clarified the much awaited guidelines for new bank licences, allowing corporates and public sector entities with sound credentials and a minimum track record of 10 years to enter the banking business. The pharma stocks too will remain buzzing, as Commerce and Industry Minister Anand Sharma has raised his concern regarding takeover of local pharma companies by foreign firms and has said that generic drugs market could be adversely hit if overseas players fully acquire local companies.

The US markets ended modestly higher after a volatile day of trade on Monday. Some weak economic reports raised concerns about the economic outlook but at the same time eased worries about outlook for the Federal Reserve’s asset purchase program. Construction spending in April increased less than expected, while index of activity in the manufacturing sector fell to 49.0 in May. The Asian markets have made mostly a weak start, though the Japanese market has made some recovery as monthly wages rose by the most in a year in April, some of the other indices in the region too are making efforts to return in green.

Back home, Indian markets continued reeling in red on Monday and benchmarks going downwards lost their other crucial support levels of 5950 (Nifty) and 19650 (Sensex), though global cues played major part but the weak economic data from the domestic front mainly added to the woes of the traders in trade for the day. While, the markets were still to recover from the decade low GDP number setback, the manufacturing growth slowed to its lowest since March 2009 and the HSBC Purchasing Managers’ Index stood at 50.1 in May against its previous reading of 51.1 in April. Though, the start of the day was in green for the domestic markets and there was some sign of recovery after the big sell-off in last session, but the things returned to their old track in the very initial hour of trade tailing the weakness in the global markets. After the plunge in the last session of the US markets, the Asian indices too followed the suit and majority of them traded lower for the day led by the Japanese market, which lost around another 4 percent for the day. Further the European markets too, extending their decline made a soft start and pressured the domestic markets. Back home, the market participants remained deeply concerned about the faltering economic growth and the despair of recovery in near term. On the same time rupee continued its depreciating run for yet another day despite the weakness in dollar overseas. Traders were concerned that Government's efforts to promote India as an investment destination was not that effective, as the FDI inflows registered 38 percent decline to $ 22.42 billion in 2012-13 compared to the previous year. Sectorally apart from IT and Tech there was some late hour recovery in the realty and metal stocks, otherwise all others ended in red. There was jubilation seen in the IT major Infosys counter after the company recalled founder and former chairman N.R. Narayana Murthy to act as executive chairman for a period of five years. He replaces current chairman K.V. Kamath, who will become lead independent director. The spillover impact was seen on other IT stocks and they remained the few gainers of the day. On the other hand, the oil and gas counter remained the major drag of the trading session, PSU OMCs despite hiking the petrol and diesel prices closed mostly in red. There was some buzz in the credit rating counters after McGraw Hill, which owns 52.77 percent of credit rating and research company CRISIL, announced to acquire another 22.23 percent stake, through the open offer. CRISIL was locked in upper circuit limit of 20 percent, while the other rating agency ICRA moved higher by over 13 percent. Finally, the BSE Sensex lost 149.82 points or 0.76% to settle at 19,610.48, while the CNX Nifty declined by 46.65 points or 0.78% to end at 5,939.30.