Markets to make a positive start; RBI policy eyed for further cues

The Indian markets made a good bounce back in last session and ended the tumultuous week in a style with WPI inflation declining further. Today, the start of the new week is likely to be on a positive note and Investors will look at the Reserve Bank of India’s (RBI) policy review later in the day to take cues. Though, there is wide expectation of RBI keeping the rates unchanged but from some corners there are buzz of a quarter basis points cut in the CRR rate, if it happens markets will get a boost and may extend their last session’s rally. Meanwhile, Chief Economic Advisor Raghuram Rajan has said that Government processes in India take too long and the country needs to change regulations that govern business. He has stressed that there is a need to improve business climate and reduce the regulations that govern business. The services related stocks are likely to be buzzing as the data of RBI has showed that India’s services exports in April 2013 were up by 22.5 percent to $12.84 billion, compared to $10.48 billion reported in corresponding period of last fiscal. There will be some action in telecom and companies related to defence, as the Commerce and Industry Minister Anand Sharma has “strongly favoured” raising the FDI cap in telecom as well as defence sector and has said that he will meet global investors to address their concerns. 

The US markets ended lower once again on Friday after IMF estimates raised concern about the early recovery of the country; also traders preferred to remain on sidelines ahead of FOMC meet in the coming week. The Asian markets have made a mixed start though the yen and South Korea’s won turned lower waiting this week’s Federal Reserve meeting and prospects of a reduction in US economic stimulus.

Back home, snapping their three days downfall, boisterous benchmarks showcased an enthusiastic performance on last trading day of the week by rallying close to two percentage points and breaking a lot of psychological levels in their northbound journey. There appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength as investors continued hunt of fundamentally strong but oversold stocks. Frontline indices managed to finish the session around their intraday high and settled above 5,800 (Nifty) and 19,150 (Sensex) levels as investors took to hefty across the board buying. Sentiments got bolstered after India’s main inflation gauge, declining for fourth straight month, surprisingly slowed down further to 4.7% for the month of May, as compared to 4.89% (Provisional) for the previous month of April, which was its lowest level since 2009. Some support also came in 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 allaying concern about the country’s Current Account Deficit (CAD) said that for the fourth quarter of financial year 2012-13, it is likely to be around 4 percent of the gross domestic product. Firm global cues too supported the sentiments with European markets opening in green, snapping a four-day losing streak, as robust US economic data outweighed persistent uncertainty over the durability of stimulus measures from the US Federal Reserve. Asian markets too shut shop mostly in positive terrain with Japanese Nikkei surging by about two percent, rebounding from their biggest drop in three weeks as the yen fell overnight. Back home, sentiments remained jubilant after shares of rate sensitive sectors such as realty, infrastructure, banking and automobiles edged higher ahead of the Reserve Bank of India’s (RBI) mid-quarter policy review on June 17 on rate cut hopes. The street is expecting 0.25% cut in cash reserve ratio (CRR) instead of interest rate next week as this move is likely to balance growth and rupee concerns. Sentiments also remained up-beat after Indian rupee gained strength during the trade after headline inflation eased further, holding out some hopes for a rate cut. The rupee was at 57.54 per dollar, appreciating by 0.43 paise per dollar at the time of equity market closing. Buying in FMCG counter also aided sentiments on reports that monsoon rains have covered half of India two days ahead of the usual date and more hefty downpours are expected next week, easing concern over southwestern regions parched by drought. Additionally, oil marketing companies like BPCL, HPCL and IOC edged higher on the buzz of increase in petrol prices by Rs 1.5-2/litre with effect from Friday midnight. Finally, the BSE Sensex surged 350.77 points or 1.86% to settle at 19,177.93, while the CNX Nifty climbed by 109.30 points or 1.92% to end at 5,808.40.