Markets to get a cautious start, likely to see some recovery with progress of trade

The Indian markets extended their fall in last session and a broad based selling was seen, with benchmarks losing about a percent and half. The sluggishness in the Services PMI after a weak manufacturing data weighed on the sentiments. Today, the start is likely to be cautious; however some recovery can be expected with the progress of the trade and traders will be eyeing the movement of rupee, which has once again started depreciating. Meanwhile, Reserve Bank of India (RBI) governor D Subbarao has said that the decision to allow corporates to apply for new licences was taken after much debate and it is in national interest. The coal and power sector stocks will be in limelight as the Coal Ministry had said that it has prepared a draft policy on utilisation of surplus coal from captive mines. The IT sector too is likely to remain in jubilant mood on government’s notification that allows SEZs and units operating in them to not pay service tax - instead of paying the tax and then claiming refunds. The NBFCs will be getting some relief, as the RBI has put on hold implementing a key directive issued last week that required a minimum wait of six months between two debt private placements from a NBFC. The banking stocks too will be buzzing with Finance minister P. Chidambaram's call to state-run banks to lower their minimum lending rate and issue more loans to stimulate economic growth.

The US markets recovered from their early weakness to end modestly higher after two sessions of decline, on getting a report of stronger than expected private sector job growth. The Asian markets have made a mixed start but most of them are in green taking cues from the positive economic report from US and on hopes that recovery there will boost the growth of exporters in the region.

Back home, distressed markets clobbered out of shape in Wednesday’s trade with benchmarks ending the session with a cut of about one and half a percentage point, weighed down majorly by the depreciation in rupee. Indian rupee fell below 60 per dollar mark on heavy demand for the greenback. The combination of domestic as well as global factors led to the brutal across the board selling and local bourses snapped the session below their crucial 5,800 (Nifty) and 19,200 (Sensex) levels. Sentiments remained down-beat since morning with frontline gauges making gap-down start. Indices extended their southward journey after India’s HSBC services Purchasing Managers’ Index (PMI), based on a survey of around 400 companies, fell from May’s three-month high of 53.6 to 51.7 in June.  Selling pressure in bank shares after the RBI mooted extra provisioning and capital requirement for banks’ exposure to companies with unhedged forex exchange positions too dampened the sentiments. Some pressure also came in after investors offloaded stocks related to power sector 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. Selling got intensified following sluggish opening in European markets. Back home, brutal selling on Metal counter too supported the downfall with stocks like JSW Steel, Sesa Goa, Sterlite Industries, SAIL, Hindalco, Nalco and Tata Steel edging lower on weak Chinese economic data. The nation’s services Purchasing Managers’ Index fell to 53.9 for June from May’s 54.3, though it remained above the 50 level dividing expansions from contraction. China is the world’s largest consumer of copper and aluminum. Additionally, selling was also visible in public sector oil marketing companies viz. BPCL, HPCL and IOC after US crude oil futures crossed $100 a barrel for the first time since September 2012 as Egypt’s political tensions escalated and as stockpiles in the US shrank the most this year. Finally, the BSE Sensex shaved off 286.06 points or 1.47% to settle at 19,177.76, while the CNX Nifty plunged by 86.65 points or 1.48% to end at 5,770.90.