Markets to get a soft start on feeble global cues

The Indian markets that surged in last session are likely to see a soft start after a day of break, tailing feeble global cues. Traders will be watching the movement of rupee after the Reserve Bank of India tightened the limit for how much individuals and companies can invest abroad without seeking permission and banned the import of gold coins and medallions. Meanwhile the World Gold Council has reported that gold imports by India, more than doubled in the second quarter of 2013 after a slump in prices in April spurred demand for bars and coins. However, there will be some respite in infra sector as the Prime Minister Manmohan Singh has said that the government will kick-start a number of new infrastructure projects including 8 new airports and two new sea-ports in the coming months to boost sluggish economic growth. Traders will also be reacting to the clarification of the ‘safe harbor’ rules, as the government announced rules  giving conditional exemption to global MNCs’ transactions with their Indian units from being questioned for suppression of income here. There will be some result announcements too, to keep the markets buzzing.

The US markets plunged on Thursday reacting to some good positive economic reports that added to concerns about the Federal Reserve scaling back its stimulus program at its next meeting. The initial jobless claims fell to their lowest level, while the Home Builders reported homebuilder confidence at a nearly eight-year high. The Asian markets have made a weak start with most of the indices suffering cut of around a percent on US concern.

Back home, extending jubilation for fourth day in a row, Indian equity markets snapped the Wednesday’s trade with a gain of over half a percent and frontline gauges recapturing their crucial 5,700 (Nifty) and 19,350 (Sensex) bastions. Benchmarks, despite some volatility, gained strength as sentiments got support with report that foreign institutional investors (FII) bought Rs 2.27 billion of cash shares on August 13. But, the bourses witnessed a steep fall, tumbling near intraday low after India’s main inflation gauge, based on monthly WPI, shot higher to 5.79% (Provisional) for the month of July, way above the Reserve Bank of India’s (RBI) perceived comfort level of 5% and against 4.86% (Provisional) for the previous month of June. Primary Articles inflation increased to 8.99 per cent as against 8.14 per cent in June and Fuel & Power inflation moved up to 11.31 per cent as against 7.12 per cent in June. Despite ugly WPI numbers, markets bounced back in late trade as buying was visible in oil gas sector with stocks like BPCL, HPCL and IOC edging higher after Oil Minister Veerappa Moily said that Government will consider a request from oil marketing companies to be allowed to raise diesel prices by more than the approved 50 paise a month. Some support also came in after international crude started showing some decline after surging in last three sessions. Firm opening in European counterparts too provided some support to domestic markets after the German economy grew by 0.7 percent in the second quarter, its largest expansion in over a year. Back home, continued buying in metal and mining stocks too supported the sentiments amid hopes that Beijing would step in to support the economy. Auto sector too surged over three percent on BSE led by over 9% surge in Tata Motors. The stock of the auto major zoomed after Jaguar Land Rover (JLR) reported a strong 21% year-on-year (yoy) jump in global sales of 31,611 units in July. However, gains remained capped as investors remained cautious on continuous decline in Indian rupee. Finally, the BSE Sensex gained 137.75 points or 0.72% to settle at 19367.59, while the CNX Nifty rose by 43.00 points or 0.75% to end at 5,742.30. Indian markets remained closed on Thursday on account of Independence Day.