Markets to get a soft start; IIP data and rupee movement eyed

The Indian markets swayed to the global trend and suffered cut of over one and half a percent in last session. While, the rupee continued its plunge despite assurance from Finance Minister and Chief Economic Advisor, there were other sector specific jitters that kept the market mood tizzy. Today, the start is likely to remain soft and traders will be eyeing the Industrial Production data along with the movement of rupee for further cues. Persistent dollar demand from importers and banks due to higher dollar in the international market has taken rupee near to the 59 mark, meanwhile with an aim to arrest rupee slide by boosting forex inflows, RBI has raised the limit for online repatriation of export proceeds by over three-fold to $10,000 and has made it mandatory for units in Special Economic Zones to repatriate full value of exports within 12 months. On the government’s part it will soon unveil measures to ensure safe financing of the current account deficit (CAD). IIP data for May too is eyed and with a sharp drop in PMI it is being expected that IIP may throw up unpleasant surprise. Auto sector stocks are likely to remain under pressure with car sales declining for the seventh straight month. Though amid all gloom prospect of good monsoon is likely to give some support to the traders.

The US markets turned negative on Tuesday, though stocks recovered during the day after moving sharply lower in early trade but the session was marred by volatility, mainly due to the Japan’s monetary policy stance. Though, some of the Asian markets are closed today, but rest of them have made a soft start extending the global rout, Japanese market was hurt most, trading lower by about two percent in early deals after Bank of Japan abruptly left its monetary policy unchanged.

Back home, distressed markets clobbered out of shape in Tuesday’s trade with benchmarks ending the session with a cut of over one and half a percentage point, weighed down majorly due to depreciation in rupee. Indian rupee hit new low of almost Rs 59 per dollar, though recovered up to certain extent after Reserve Bank of India (RBI) reportedly intervened in the market. Traders also remained sidelines ahead of April industrial output and consumer price index-based inflation data on June 12, which will help determine the RBI’s stance on the June 17 monetary policy review. Selling was both brutal and wide based as none of the sectoral indices on BSE were spared and local bourses snapped the session below their crucial 5,800 (Nifty) and 19,200 (Sensex) levels. However, slight recovery was witnessed in noon deals, but proved short lived as continued selling in Metal counter dragged the markets near day’s low by the end of session. Losses in Metal counters were led by Jindal Steel stocks, which plummeted over 15 per cent on coal scam woes. The Central Bureau of Investigation (CBI) has registered a case against Jindal Steel & Power over coal block allocation and is currently investigating alleged irregularities in awarding of coal mining rights potentially worth billions of dollars to private companies. Sluggish global cues too dampened the sentiments as European markets traded lower in early deals on Tuesday ahead of a two-day public hearing in Germany’s constitutional court examining the legality of the ECB's bond-buying scheme. Some pressure also came in from selling in banking stocks after the RBI imposed monetary penalty on Axis Bank, HDFC Bank and ICICI Bank for violating its instructions. Auto sector too witnessed selling during the trade after Society of Indian Automobile Manufacturers (SIAM) said that the car sales in India fell an annual 12.3% in May. Shares of frontline jewellery companies remained under pressure during the trade. Stocks like, Titan Industries, Shree Ganesh Jewellery House, Tara Jewels, Gitanjali Gems and Tribhovandas Bhimji Zaveri (TBZ) on concerns that a frequent rise in gold import duty and the sustained depreciation of the rupee against the dollar may dampen the growth of the sector. Finally, the BSE Sensex shaved off 298.07 points or 1.53% to settle at 19,143.00, while the CNX Nifty plunged by 89.20 points or 1.52% to end at 5,788.80.