Markets to get a cautious start on mixed global cues

The Indian markets despite the RBI’s policy disappointment and worrying trade deficit data presented a good show in the last session and surged on value buying in bluechips. Today, the start is likely to remain cautious as the regional peers are not giving positive signals. Though, now all eyes will be on Fed but traders at home will be watchful with the RBI’s stance in its mid-quarter review of the monetary policy, who has said that expensive food items like cereals and vegetables has continued to put pressure on overall inflation rate. Meanwhile, after the Commerce Minister, Finance Minister P Chidambaram too has said that foreign investment limits in different sectors where ceilings are not serving their intended purpose will be revisited. Market will also watch the movement of rupee which has weakened again on fresh dollar demand from importers and some banks. There will be some reaction to the latest cabinet reshuffle of the government where eight new ministers have been inducted. The telecom stocks are likely to keep buzzing with the latest TRAI’s decision to reduce ceilings for national roaming calls and SMS, which will be effective from July 1.

The US markets ended higher on Monday, recovering from the selling in mid of the session on concern of Federal Reserve's stimulus program. Traders took cues from some upbeat economic data; homebuilder confidence jumped to a seven-year high, while the regional manufacturing rose more than expected. The Asian markets are looking a bit nervous ahead of the US Fed’s policy meet, while the Chinese market was down led by developers on concern that gains in home prices will limit scope for monetary easing.

Back home, Extending their previous session’s northward journey, key domestic benchmarks snapped the Monday’s trade near day’s high with both the frontline gauges re-capturing their crucial 5,850 (Nifty) and 19,300 (Sensex) bastions. Though, markets after a positive opening witnessed a sharp cut to touch their intraday lows in mid morning trade after Reserve Bank of India (RBI) in its June mid quarter monetary policy, as expected, left repo rate unchanged at 7.25% and kept the cash reserve ratio (CRR), or the share of deposits banks must keep with the central bank, steady at 4%. Consequently, the reverse repo rate under the LAF remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 8.25%. Sentiments also got clobbered after India’s May trade deficit widened to $20.1 billion from $17.8 billion a month ago mainly on account of high imports of cheaper gold. Exports for the month fell 1.1% to $24.51 billion than the level of $24.77 billion recorded in the same month previous fiscal, while merchandise imports rose about 7% to $44.65 billion over the level of imports valued at $41.73 billion in May 2012. However, investors shrugged-off both these somber macroeconomic data and started piling up positions in beaten down but fundamentally strong stocks. Buying in index heavyweight like Reliance Industries (RIL) and Bharti Airtel also supported markets up-move. Shares of RIL extended its previous session’s gains triggered by partner Niko Resources providing clarity on the companies’ recent gas and condensate discovery at key KG-D6 block in India, while Bharti Airtel edged higher by over two and a half percent after the company said that it has completed the allotment of 19.98 crore new shares, representing 5% equity stake in the company, to Qatar Foundation Endowment, in one of the largest private equity (PE) transactions in India. Domestic benchmarks extended their rally in second half after European markets made a firm start on Monday. Back home, some support also came in from buying in FMCG counter after reports that monsoon rains have covered the entire country a month ahead of schedule. Additionally, stocks of telecom sector like, Reliance Communication, Idea Cellular, MTNL and Tata Communications edged higher after the telecoms regulator allowed carriers to offer free nationwide mobile roaming to subscribers for a fixed fee from July 1, 2013. Finally, the BSE Sensex gained 147.97 points or 0.77% to settle at 19,325.87, while the CNX Nifty rose by 41.65 points or 0.72% to end at 5,850.05.