Markets to get a cautious start on sluggish global cues

The Indian equity markets consolidated in last session and the major indices took a breather after vehemently rallying for past three sessions. Today, the start is likely to remain cautious as the global cues are not good, traders will also be concerned about the rising dollar index. There is disappointing news that India fared poorly in ‘ease of starting business’ on Global Innovation Index (GII). India has ranked 66th in 142 economies across the world. However, there is good news for the telecom sector, as the Telecom Commission, the highest decision-making body in the telecom ministry, endorsed a proposal to increase foreign direct investment (FDI) ceiling in the sector to 100% from the current 74%. However power sector stocks are likely to come under pressure on report that government may stop accepting fresh applications from power plants seeking coal supply for the next two years in view of acute coal shortage.Oil companies too are likely to be under pressure, as the international crude oil prices surged to their 13 month high.

The US markets extended their bearish run on Tuesday and ended modestly lower after a volatile day of trade. Though, the economic news was good as the factory orders surged in May but traders remained reluctant to make any significant moves ahead of the Independence Day holiday on Thursday and the release of the closely watched monthly jobs report on Friday. Asian markets have made mostly a weak start, as the crude prices surged on worries that turmoil in Egypt will impact the supplies. Japanese market was down despite the weakening yen, while the Chinese market was down ahead of the announcement of the non-manufacturing PMI data.

Back home, Indian equity indices which showcased awe-inspiring performances in last three back to back sessions, went on to consolidate in Tuesday’s trade by settling with a cut of over half a percent. Sentiments remained down-beat since beginning on account of sluggish core sector data. The core sector of eight infrastructure industries recorded a growth of 2.3 per cent in May this year against 7.2 per cent in the year-ago period, mainly on the back of contraction in coal, crude oil, natural gas and fertiliser output. Also, the government’s effort to increase FDI limits in sectors such as defence and telecom was likely to get some opposition with the home ministry differed on higher ceiling, raising security concerns.  Selling got intensified after European markets turned in the red with CAC and FTSE sliding by about quarter a percent in early deals despite positive US and Euro-zone data. Asian markets too ended mostly in the red, as investors treaded cautiously at higher levels amid concerns about the Chinese economy. Back home, sentiments remained under pressure as Indian rupee gave up its initial gains and depreciated by over ten paise at the time of equity markets closing. Selling in automobile space too dampened the sentiments as stocks like Tata Motors, Bajaj Auto, Maruti Suzuki and Ashok Leyland edged lower after reporting lower sales numbers in June due to slow down in demand.  Ashok Leyland reported a drop of 31.30% in June sales at 6,967 vehicles, as against 10,146 vehicles sold in same month year ago, while Bajaj Auto registered 14% fall in total sales including exports to 295,749 units in June 2013 against 345,162 units in June 12. Oil and gas shares too witnessed profit taking after they gained following the hike in natural gas price by the government to $8.4 mBtu from $4.2. Banking stocks also ended lower after 26 companies submitted their applications to the RBI for bank licence. Further the Finance Minister P Chidambaram said that there was no ceiling on the number of entities which can be permitted to operate a bank. Finally, the BSE Sensex lost 113.57 points or 0.58% to settle at 19,463.82, while the CNX Nifty declined by 41.30 points or 0.70% to end at 5,857.55.