Markets to make mildly soft start, recovery expected in late trade

The Indian markets looked fatigued and despite its valiant effort in second half could not manage a close in green in the last session. Today, the start is likely to remain cautious as the global cues are still weak. Some recovery can be expected in the late trade and traders will mainly be eyeing the movement of rupee, which has been on a free fall and touched the psychological level of 57 in last session, though the Finance Minister P Chidambaram has said that there is no cause for alarm and the currency will soon find its stable level. Markets are likely to get some support with Financial Services Secretary’s statement that domestic economy is likely to kick- start towards revival in the next 3 to 6 months as a large number of the 215 stalled projects are expected to start rolling. There is likely to be buzz in the retail business related stocks as the government has clarified rules for multi-brand retail entry and said that they will have to make fresh investments in back-end infrastructure and acquisition of supply chain or back-end assets from existing entities would not be allowed. There will be some buzz in the banking stocks too, after the Finance Minister asked banks to lower interest rates in an effort to drive growth and pass on rate-cut benefits to retail and corporate borrowers.   

The US markets made a good bounce back on Thursday, though the trade remained volatile ahead of monthly jobs report on Friday. However, traders took support from the report of drop in initial jobless claims in the week ended June 1.Most of the Asian markets have made a soft start led by the decline in the Japanese market which plunged again on yen’s biggest surge in last three years.

Back home, Indian equity benchmarks resumed their southward journey after a day of halt on Thursday with both the frontline gauges ending slightly in red. Markets kick-started the day’s trade on daunting note pressurized by feeble global cues, but displayed a decent pullback afterwards, supported by recovery in rate sensitive counters viz., Auto, Realty and Bankex. The sentiments on the street also turned somewhat positive after Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission stated that fiscal deficit is clearly coming under control. The country’s fiscal deficit fell to 4.9% of GDP in the fiscal year ended March and the government targets it at 4.8% in the current fiscal year. Flat-to-positive start of European markets also provided strength to Indian equity markets and markets gained positive trajectory, recapturing 5,950 (Nifty) and 19,600 (Sensex) in the last leg of trade. But, weakness in Asian counters took their toll on domestic sentiments dragging the Indian bourses back into red in the dying hours. Back home, sentiments remained frail after the rupee weakened against the US dollar and hit lowest since June 28, 2012. The partially convertible rupee was at 56.91, down 18 paise against its previous close. Meanwhile, index heavyweight Reliance Industries (RIL) declined on absence of any positive surprise announcement at its annual meet, even though Chairman Mukesh Ambani said that the company planning to invest Rs 1.5 lakh crore in its businesses over the next three years. Additionally, shares of Jewellery makers like Titan Industries, Tribhovandas Bhimji Zaveri etc edged lower during the trades after the government increased customs duty on gold by two percentage points to eight per cent, to arrest rising gold imports, which could widen the current account deficit (CAD). Finally, the BSE Sensex lost 48.73 points or 0.25% to settle at 19,519.49, while the CNX Nifty declined by 2.45 points or 0.04% to end at 5,921.40.