Markets to start the new week on a somber note tailing weak global cues

The Indian markets suffered sharp annihilation in last trading session, with benchmarks witnessing cut of around four percent in a day after the Reserve Bank of India (RBI) imposed partial capital controls on companies and individuals to stabilise the rupee. Today, the start is likely to remain somewhat lack luster as the global cues remain feeble and there is not much from the domestic front too. However, the RBI had clarified that its measures to put curbs on outflows were only a roll-back of its measures announced six years ago and companies can still approach the central bank directly for overseas investments above the stipulated limit. Prime Minister Manmohan Singh too has ruled out the possibility of India witnessing a repeat of the 1991 balance of payments crisis and also reversing the path to globalisation of the economy and has asked RBI of need for a re-think on the tight monetary policy and hawkish stance on inflation. Traders will also be eyeing the movement of rupee and development in the commodity markets related to the National Spot Exchange (NSEL) fiasco. There will be some buzz in the IT sector, as the Commerce and Industry Minister Anand Sharma will meet US Trade Representative Michael Froman this week to discuss India’s concerns related to additional visa restrictions on IT professionals.

The US markets closed in red in last session on heightened voices for stimulus tapering after a mixed batch of economic data. The Asian markets have mostly made a weak start and barring one-two indices all are trading in red. Japanese market has recovered from the early losses on report that exports increased 12.2 percent in July from a year earlier.

Back home, Friday’s session turned out to be a horrendous session for the Indian markets which disintegrated like a ‘house of cards’ and went on to breach various key technical levels in the around four percent freefall. The frontline indices which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the journey only halted with the session’s close. Earlier, benchmark got a gap down opening, in tandem with the somber sentiments prevailing in global markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill with Nifty losing over 200 points for the first time since September 22, 2011. Sentiments further dampened as banking shares clobbered out of the shape after the Reserve Bank of India (RBI) on August 14, 2013 announced additional measures to support the Indian rupee by stemming foreign exchange outflows by Indian residents. Overseas direct investment (ODI) by Indian companies have been cut three-fourths, 100% from 400%, making it more difficult for local corporates to buy overseas assets. Meanwhile, RBI reduced the limit for remittances made by Resident Individuals, under the Liberalised Remittance Scheme (LRS Scheme), to $75,000 from $200,000 per financial year. Event though, Indian rupee slipped to all time low in early trade despite a slew of measures announced by the central bank at boosting inflows and curbing outflows. Weak global cues too played the spoilsport for Indian markets as investors remained concerned that the roll-back of US stimulus could spark selling pressure by the overseas investors in the equity space. Back home, selling was both brutal and wide based as none of sectoral indices on BSE were spared. Sentiments further got dented with shares of jewellery makers tumbling after the Reserve Bank of India banned imports of gold coins and medallions. Titan Industries, PC Jeweller, Rajesh Exports, Shree Ganesh Jewellery House and Tribhovandas Bhimji Zaveri (TBZ) were down 2-11% in opening deals. Finally, the BSE Sensex shaved off 769.41 points or 3.97% to settle at 18,598.18, while the CNX Nifty plunged by 234.45 points or 4.08% to end at 5,507.85.