Markets to get some recovery on positive global cues

The Indian markets suffered some selling in last session and major indices lost close to a percent mainly on weak global cues. Today, the start is likely to be in green and the markets may recover major portion of their losses in early part of trade, however the rupee movement will remain a concern after touching its all time low in last session. The local currency is expected to test new lows this week as FIIs pull out of local markets for better returns elsewhere after Fed's further clarification. There will be some cheer for the manufacturing sector, as a high-level meeting convened by Prime Minister Manmohan Singh will discuss a spectrum of ideas to boost domestic manufacturing. The high level committee on manufacturing headed by the prime minister will explore and deliberate on ways to use the sharp rupee depreciation against the dollar to its advantage, especially to boost textile exports. There will be some buzz in the NBFCs too, as RBI has eased rules for non-banking finance company-asset finance companies to raise external commercial borrowings by allowing the lenders to raise such funds through the automatic route. There will be some concern in the whole auto sector after the country’s largest carmaker Maruti Suzuki shut the third shift at its diesel engine plant at Manesar due to demand slump.

The US markets extended their gains on Monday ahead of the start of earnings season and on getting report that consumer credit increased in May by $19.6 billion to $2.8 trillion, the most in a year. All the Asian markets have made a positive start taking cues from the good beginning of US quarterly earnings season with Alcoa announcing better than expected numbers after market hours. Chinese market too was in green despite the report that inflation rose more than forecast in June.

Back home, Indian equity indices, snapping two sessions rally, ended the Monday’s trade in the red with a cut of about a percentage point. After a gap-down opening, Indian benchmarks extended their decline to touch low point of the day as depreciating rupee weighed on the market sentiments after breaching 61/$ mark in early deals. Sentiments also remained dampened after a CII survey stated that unless the government tackles issues like dwindling FDI flow and high current account deficit, the rupee will continue to remain volatile and may depreciate further. Sentiments remained down-beat since morning as better-than-expected US jobs growth increased the possibility that the Federal Reserve will roll back its stimulus in coming months, sending the dollar to a three-year high against a basket of major currencies. Weakness in Asian markets too dampened the sentiments with all the major indices in the region ending in the red. However, some amount of recovery was witnessed in domestic markets following firm opening in European counterparts. Back home, recovery also got support from reports suggesting Gold imports into India fell by 80.56 percent to 31.5 tonnes in June from the previous month, way lower than the trade body’s estimate. Some support also came in from buying in software and technology stocks as rupee hit record low against the dollar. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. However, the recovery was not enough to pull the bourses back into green terrain as rise in FMCG, software and technology counters was offset by selling in oil and gas, PSU, realty and auto sectors. Sentiments also got hurt after banking stocks including Axis Bank, ICICI Bank, State Bank of India, HDFC Bank and most of the PSU banks slipped over a per cent, weighed down by a weak rupee which further bleaks the outlook on rate cut hopes by the RBI. Additionally, public sector oil marketing companies viz. BPCL, HPCL and IOC declined as US crude oil futures hit a 14-month high. Finally, the BSE Sensex lost 171.05 points or 0.88% to settle at 19,324.77, while the CNX Nifty declined by 56.35 points or 0.96% to end at 5,811.55.