Markets likely to see some recovery on positive global cues

The Indian markets were savaged in last session, deepening their cuts by over a percent mainly on feeble global cues. Today, some recovery can be expected as the other markets have stabilized after the positive economic data from US. Traders are also likely to get some support with finance minister P Chidambaram’s statement that the government will unveil more reforms in the next few days and weeks, to revive investment and growth and there is no need for panic over the rupee’s weakness. Chidambaram has further said that the economy was stronger than what it was this time last year and inflation too was low. Chief Economic Advisor Raghuram Rajan too has allayed concern about the country’s Current Account Deficit (CAD) and has said that for the fourth quarter of financial year 2012-13 it is likely to be around 4 percent of the gross domestic product. Though, traders will be watching the movement of rupee which has once again started depreciating against dollar. Also, there will be concern with HSBC lowering India’s growth forecast for this fiscal year to 5.5% from 6% citing slow reform process. Oil & Gas sector will keep buzzing, as amid the row over a proposal to raise natural gas price, Finance Minister has said that the government will take a decision on the issue keeping “larger interest” in mind.

The US markets bounced back in last session on getting some better than expected economic data and the traders even shrugged the concern that better economy may lead the Fed to start tapering its stimulus measures soon. The Asian markets too are looking in recovery mood and have made mostly a positive start with the Japanese market surging by over three percent in early deals, rebounding from their biggest drop in three weeks as the yen fell overnight.

Back home, Indian equity indices snapped a highly choppy session of trade on a depressing note on Thursday with both the frontline gauges ending the session below their crucial 5,700 (Nifty) and 18,900 (Sensex) levels with a cut of over a percentage point as leads remained weak not only locally but globally as well. Key benchmarks opened the session with a huge gap on the down side, weighed down by profit taking in blue chip stocks by foreign institutional investors in the wake of falling rupee. Sentiments also remain dampened after the Finance Minister P Chidambaram at a press conference today did not announce any concrete measures to prevent decline in the Indian currency. However, the finance minister said that the government will soon take a call on further reforms in foreign direct investment (FDI), a move which on implementation could bring back some cheers into equity markets. Slight recovery was seen in early noon deals after government today revised the industrial output growth rate to 2.2 percent in April from 2 percent released yesterday after a correction in recording of production data for electricity, nevertheless, the second revision of IIP to 2.3 percent in the late trade was largely ignored by the investors. The IIP for the electricity sector for the month of April 2013 is corrected to 159.10 from 153.80 as shown in the press release dated June 12, 2013. But, traders continued to offload their holdings in index heavyweights, amid weak Indian rupee, which once again depreciated to 58.50 per dollar level during the trade. Market-men also remained on the sidelines ahead of wholesale price inflation (WPI) data which is expected to remain in the central bank’s comfort level of 5 percent. Sentiments also got clobbered as European markets made a sluggish start with banks and commodity stocks, sectors most exposed to the broader economic fortunes, tumbling in early deals on concerns about stimulus unwinding and Greek political turbulence. Moreover, brutal selling in Asian markets too dampened the sentiments with Japanese Nikkei tumbling over six percent as the yen rebounded, sending shares of exporters tumbling. Back home, selling in rate sensitive counters like auto, banking and realty also dampened the sentiments after high consumer price inflation dashed hopes of a rate cut by the central bank in its policy meet on June 17. However, losses remain capped up to certain extent as some encouragement came in with Fitch Ratings’ revision of India’s outlook to Stable from Negative and affirmation of ‘BBB-‘ rating. Fitch further said it expects the economy to recover modestly to 5.7% and 6.5% in FY14 and FY15, respectively. Finally, the BSE Sensex shaved off 213.97 points or 1.12% to settle at 18,827.16, while the CNX Nifty plunged by 61.10 points or 1.06% to end at 5,699.10.