Markets to turn south again after a modest pause

The Indian markets managed a flat but positive close after a volatile last session. Traders remained concerned about the economy and could not gather courage despite good global cues. Today, the start is likely to be a gap-down one and the markets once again are likely to show a tepid trade on concern of weak domestic economy and global growth concern after HSBC said that for the first time in over four years the overall business activity in the private sector in India has contracted. Service sector contracted in July due to drop in new business. Industry body CII too has said that India needs to get back to 8-9 percent economic growth by attracting investments that have been choked by the high interest regime. Textile stocks are likely to remain in dull mood, as the India's export of textiles and clothing remained almost the same year-on-year, in the first three months of the fiscal to $7.79 billion compared to $7.76 billion in last fiscal. However, there is some good news too, FDI into India increased by 24.2 percent year-on-year to $3.95 billion in April-May.

There will be some important result announcements and the markets will be reacting to them. Bombay Dyeing, Bosch, Crompton Greaves, Gillette India, Jindal Saw, Tata Power, Uflex and Unitech are among many to announce their numbers today.

The US markets made a lack luster start of the new week and ended mostly lower in last session, though there was a report that activity in the US service sector grew at a faster rate in the month of July. But traders remained concerned about the uncertainty about the outlook of the Federal Reserve’s asset purchase program. The Asian markets have made a weak start and some of the indices are trading lower by over a percent led by the Hang Seng market, regional indices were in somber mood on speculation that good service industry data will lead the Fed to reduce its economic stimulus.

Back home, snapping eight days of continuous fall, Indian equity benchmarks witnessed some respite albeit modest and both the benchmarks managed a close in green on Monday. Markets kick started the session in the positive terrain as some support came in from FICCI’s survey that India’s manufacturing sector is likely to witness a ‘slight upturn’ in the second quarter on the back of government’s efforts to remove bottlenecks by clearing large projects and a better export outlook. Sentiments also got some boost from report that the Finance Ministry is likely to finalize Rs 14,000-crore capital infusion for public sector banks by the end of this month to meet their global capital requirement norms, Basel III. Sentiments were further boosted with report that foreign institutional investors (FIIs) bought shares worth a net Rs 283.79 crore on August 2, 2013. Firm opening in European markets too supported the sentiments. Back home, indices pared most of their initial gains after India’s services PMI contracted first time in 20 months to 47.9 points in July from 51.7 points in the previous month. A reading above 50 points indicates growth, while that below 50 signifies a contraction in the sector. Moreover, last week, Manufacturing PMI managed to stay afloat the growth line as it fell to 50.1 points in July from 50.3 points in June. Consequently, the Composite PMI - considering both manufacturing and services - also contracted to 48.4 points in July from 50.9 points in June this year. Market-men also remained concerned over political developments with the start of the Monsoon session, covering key reform Bills like opening up the insurance and pension sector and adjournment amid uproar over Telangana and Bodoland issues. Sentiments also remained dampened as selling was witnessed in capital goods segment, led by state-owned Bharat Heavy Electricals (BHEL), which crashed over 19 percent on the BSE as it reported a dismal performance on every parameter as the first quarter standalone net profit halved to Rs 465.4 crore from Rs 920.9 crore in a year ago period. However, buying in metal and mining counter supported the sentiments with stocks like Jindal Steel, Sesa Goa, Sterlite Industries and Tata Steel all surging after China’s service industries showed the first pick-up in growth since March. Finally, the BSE Sensex gained 18.24 points or 0.10% to settle at 19,182.26, while the CNX Nifty rose by 7.50 points or 0.13% to end at 5,685.40.