Markets likely to make a cautious start; rupee movement eyed

The Indian markets consolidated in the last session on some profit booking and lacking any supportive cues. Today, the start is likely to remain cautious and the traders will be keep a close eye on the movement of rupee, which is touching a new low everyday and has slumped past 58 mark in last session, weakening the case of any rate cut in RBI’s upcoming policy review, as the broader weakness in the Indian rupee is being attributed to the country's ballooning current-account deficit. However, the country’s Chief economic adviser Raghuram Rajan has said that the weakness in the rupee could be temporary and medium-term steps taken earlier would continue to help the rupee to find a level consistent with sustainable growth. There will be some cautiousness in the market, as the Paris-based think tank OECD has said that the India's growth prospects continue to remain below trend. Today there will be some buzz in the banking stocks after the Reserve Bank of India on Monday imposed penalties on Axis Bank, HDFC Bank and ICICI Bank for violating guidelines related to details of customer identity.

The US markets made a flat closing on Monday, though the trade remained choppy and major indices kept bouncing back and forth throughout the day lacking any major US economic data and overlooked the report that S&P's upgraded its outlook for the US credit rating to "stable" from "negative". The Asian markets have made a mixed start and some indices are trading in red albeit marginally, Japanese market was again trading high ahead of a Bank of Japan's policy statement today and as the yen held a two day decline against most of its major peers.

Back home, Indian equity indices, after witnessing over one and a half percent cut during passing week, witnessed consolidation in volatile day of trade on Monday. Though, both the gauges opened on the positive note supported by firm global cues, failed to hold on to intraday gains and slipped into the negative terrain as profit booking picked up in realty, banks, metals and pharmaceuticals, as the depreciating rupee hurt sentiments. The rupee today fell by a whopping 90 paise to hit a new life-time low of 58 during the trade on persistent dollar demand from importers and banks amid the US currency gaining overseas. Moreover, investors also remained on sidelines ahead of Index of Industrial Production (IIP) data slated to be announced on June 12 and Wholesale Price Index (WPI) inflation on June 14. Some cautiousness also prevailed due to FICCI’s survey, which said that business confidence dropped for a consecutive quarter in January-March 2012-13, stood at 57.4 as compared to 61.2 during the previous quarter. However, global cues remained supportive as most of the Asian equity indices shut shop in green after a report showed that the US added more workers than expected. European counters too traded mostly higher in early deals following a rebound in Japan’s benchmark Nikkei on the back of a strong gross domestic product (GDP) revision and a weaker yen. Back home, consumer durables mainly bore the brunt of profit booking. Stocks of Rajesh Exports, Gitanjali Gems and Titan Industries fell after Chief Economic Advisor Raghuram Rajan, within days of hiking import duty on gold, said that government could take more steps to curb demand for the gold amidst widening current account deficit (CAD). Metal stocks too declined following uninspiring Chinese economic data released over the weekend. China is the world’s largest consumer of copper and aluminum. Additionally, public sector oil marketing companies viz. IOC, BPCL, HPCL all edged lower as US crude oil futures traded near the highest level in more than two weeks amid speculation that demand will improve in the United States, the world's biggest crude oil consumer. On the flip side, buying in software and technology counters supported the sentiments. Stocks like Infosys, TCS, Wipro and HCL Technologies edged higher after rupee dropped to a record low during the trade tracking gains in the US dollar after disappointing data from China and slightly better-than-expected US jobs data. Additionally, stocks related to FMCG space too surged as southwest monsoon hit Mumbai a day earlier than its usual date on Saturday. Finally, the BSE Sensex gained 11.84 points or 0.06% to settle at 19,441.07, while the CNX Nifty declined by 3.00 points or 0.05% to end at 5,878.00.