Markets may get a gap-down start on feeble global cues

The Indian markets despite early decline and volatility managed to post modest gains in last session, taking cues from the recovery in the rupee. However, today the start may be a gap-down one amid the global meltdown and the domestic markets too will be reacting negatively to the developments in US. Also, there will be some cautiousness in the market, as despite government’ various efforts to promote the country as an investment destination, the foreign direct investment (FDI) in India has declined by six percent to $5.47 billion during January-March quarter of the current calendar year. However, there will be some foreign fund inflows that may support the domestic currency as in a biggest sale of G-Secs so far this year, the market regulator Sebi will conduct an auction for a grant of investment limits to foreign investors in government debt securities worth over Rs 42,000 crore. There will be some buzz in the textile stocks as the new Textile Minister K. S. Rao has said that the Government has set an ambitious textile export target of $50 billion this fiscal. There will be some action in pharma stocks too, as the EU antitrust regulators has imposed fines totalling 146 million euros on nine global drugmakers, including Ranbaxy.

The US markets suffered severe jolt in last session and all the major indices slumped by over a percent in a negative reaction to the Federal Reserve's monetary policy announcement where Chairman Ben Bernanke suggested the US central bank could begin scaling back bond-buying program later this year. The Asian markets have made a weak start and some of the indices are trading lower by over two percent, weighed down by Fed’s indications. Also, there was growth concern from within the region as the flash PMI of China showed that the manufacturing is shrinking at a faster pace than expected.

Back home, key domestic benchmarks witnessed consolidation as investors opted to remain on sidelines amid growing anxiety over the outcome of US Federal Open Market Committee meeting later on June 19, 2013. Frontline gauges traded in red for most part of the session but buying which emerged in dying hours, largely supported by recovery in European markets after a sluggish start, mainly acted as saving grace for domestic equity markets and helped them to hold crucial 5,800 (Nifty) and 19,200 (Sensex) levels. Markets started the session in red in the absence of any positive trigger. Bourses extended their southward movement as sentiments got dampened with foreign institutional investors (FIIs) selling shares worth a net Rs 597.37 crore on June 18, 2013. Weakness in Asian markets too dampened sentiments as investors opted to stay away from piling up positions in risky assets awaiting Federal Reserve to clarify the outlook on its massive stimulus when it ends a two-day policy meeting later in the day. Back home, some support also came in after shares of frontline non-banking finance companies (NBFCs) like Mahindra and Mahindra Financial Services, Bajaj Finserv, Reliance Capital, L&T Finance Holdings rallied up to 8 percent in anticipation of getting banking licenses. Meanwhile, telecom stocks also rang loud after TRAI had allowed telecom service providers the option of either charging a flat upfront fee or rates set by TRAI, for roaming services. Additionally, aviation stocks rallied with Jet Air India, Spicejet and Global Vectra edged higher in early deals on reports that a government panel has recommended allowing complete foreign ownership of aviation companies. However, up-side remain capped as some pressure came in from selling in selected stocks from power and FMCG counters as 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. Finally, the BSE Sensex gained 22.42 points or 0.12% to settle at 19,245.70, while the CNX Nifty rose by 8.65 points or 0.15% to end at 5,822.25.