Markets likely to taste a good bounce back after three days of decline

The Indian markets went through a choppy last session, there were lots of recovery attempt however they met with selling at higher levels that once again pulled the markets lower. Today, the start is likely to be good and markets may bounce back after three straight sessions of plunge with Reserve Bank of India (RBI) signaling a partial relaxation in its tight money policy by announcing slew of measures to ease liquidity, including Rs 8,000 crore bond buyback, to ensure adequate credit flow to the productive sectors. RBI also relaxed the SLR requirement by allowing banks to retain SLR holdings in Held To Maturity (HTM) bonds category at 24.5 per cent until further instructions. Meanwhile, the finance minister met top officials like government advisers and secretaries. Prime Minister's Economic Advisory Council Chairman, Planning Commission Deputy Chairman for the second day in succession discussing the current economic situation. Traders will be watching the rupee and the bond market for further cues. However, there will be some cautiousness too, as the global rating agency Standard & Poor's has said that it will maintain negative outlook for the country as currency depreciation is adversely impacting investor confidence.

The US markets though ended mixed with the S&P 500 and the Nasdaq managing to snap their recent losing streaks but the traders remained reluctant to take major positions ahead of the release of the minutes of the last FOMC meeting. The Asian markets have mostly made a soft start waiting to take cue from the minutes of the Federal Reserve’s July meeting.

Back home, extending southward journey for the third straight day, Indian equity indices once again ended in the red terrain as sentiments remained hawkish on concerns over depreciating rupee that hit a fresh life-time low on Tuesday. Though, after a gap down opening markets soon started recovering, showing great resilience as traders opted to buy battered down but fundamentally stocks. Recovery in Indian rupee too supported the sentiments, but profit booking at higher levels dragged the gauges lower. Sentiments also remained dampened after the government imposed new restrictions on foreign exchange outflows and gold imports in an attempt to prop up the rupee. Investors’ sentiments also remained pessimistic after the leading financial services firm JP Morgan downgraded Indian markets to ‘neutral’ from ‘overweight’ on account of weak rupee, faltering economic growth and reversal of flows. Weak opening in European counterparts too dampened the sentiments, while Asian markets shut shop in the red as investors remained concerned that the Fed’s stimulus concern after last week’s flurry of data. Back home, sentiments also got clobbered out of shape on report that foreign institutional investors (FIIs) sold shares worth a net Rs 680.08 crore on August 19, 2013. The sentiments remained down-beat as the rupee, plunging lower breached its historic low level of 64 a dollar, though some speculated RBI intervention held the rupee within the limits, restricting its further fall. Meanwhile, the consumer durables remained the laggard since morning and could not recover despite the government banning duty-free import of high-end flat screen plasma TVs. Moreover, capital goods stocks like L&T, Bhel and ABB hit 52-week low on worries the ongoing slowdown in the economy could restrict new orders. However, the losses remained capped as investors opted to take positions in metal and realty counters. Banking stocks too recovered after initial drop as rupee and bond witnessed recovery. Moreover, some solace also came in after the Moody’s Investors Service reiterated its stable outlook on India’s Baa3 sovereign-credit rating, the lowest investment grade, saying the nation has adequate currency reserves for balance of payments needs in the near term. Meanwhile, Vedanta group metal stocks rallied on reports that the legal hurdle has been cleared for government’s stake sale in Hindustan Zinc and BALCO. Finally, the BSE Sensex lost 61.48 points or 0.34% to settle at 18,246.04, while the CNX Nifty declined by 13.30 points or 0.25% to end at 5,401.45.