Markets to get a cautious start ahead of Fed announcement

The Indian markets after a choppy session ended with a cut of over half a percent in last session mainly on global cues and weakness in rupee. Today, the start is likely to remain cautious ahead of the Fed’s announcement in the evening but some recovery can be expected in the latter part of the trade. Meanwhile, Reserve Bank of India has said that the country would have to increase exports to deal with challenge of high current account deficit. The telecom and aviation stocks are likely to remain in focus, as a government panel headed by department of economic affairs Secretary Arvind Mayaram has recommended a dramatic liberalisation of India's foreign direct investment regime, including raising the FDI limit to 74% in multi-brand retail and allowing complete foreign ownership of telecom and aviation companies. There is other good news for the aviation sector, as the month of May has witnessed positive growth in air traffic after almost 15 months of decline. There will be some somberness in the power and FMCG sectors as the heavy rains may affect the paddy crop in North India, while in the hill states of Uttarakhand and Himachal Pradesh it is disrupting electricity generation at hydropower projects.

The US markets surged on Tuesday, ahead of the Federal Reserve’s announcement. Traders took note of notable rebound in housing starts in the month of May, which was still below the expectation and could lead to Fed not scaling back its stimulus program in the near future. The Asian markets have made a mixed start, though the Japanese market was gaining by around two percent supported by rally in exporters after the nation’s shipments increased and the yen weakened.

Back home, snapping two days winning streak, key domestic benchmarks ended the volatile session of trade with a cut of over half a percent as market participants opted to book their profits ahead of the US Fed meet which begins later today. The frontline gauges, after trading negatively in first half, pared their initial losses and entered into green terrain as some support came in after the government approved 16 projects envisaging foreign investment worth Rs 1,647 crore, while deferring Punj Lloyd’s proposals for lack of security clearance. Sentiments also got underpinned on report that indirect tax collection in May grew by 4 per cent to Rs 37,695 crore. On category wise, customs duty collection for the month stood at Rs 14,997 crore, while service tax and excise duty collections were Rs 8,998 crore and Rs 13,700 crore.  Some support also came in to the domestic bourses as European markets, after a negative start, pared most of their losses in early deals. Most of the Asian share markets too ended in green as investors awaited the outcome of the two-day Federal Reserve meeting starting from June 18, 2013. Back home, profit booking emerged in the late trade dragged the bourses in red and markets ended the session near their intraday lows. Sentiments got clobbered after Indian rupee depreciated below 58.50 per dollar mark at Interbank Foreign Exchange market due to dollar demand from custodian banks, oil importers and defense related payments. Selling in power counter also dented sentiments. Stocks like BHEL, GMR Infra, NTPC, Lanco Infra and NHPC declined after the Ministry of Coal (MoC) issued show cause notices to two more coal blocks in Odisha over delay in developing the mines, continuing its crackdown on non-serious allocatees. Interest rate sensitive banking stocks edged lower after the Reserve Bank of India (RBI) kept repo rate and cash reserve ratio unchanged at its mid-quarter review of monetary policy on June 17, 2013. Finally, the BSE Sensex lost 102.59 points or 0.53% to settle at 19,223.28, while the CNX Nifty declined by 36.45 points or 0.62% to end at 5,813.60.