Markets to start the new week on a flat-to-soft note

The Indian markets continued reeling in red and lost about another percent in last session. Today, the start of the holiday truncated week is likely to be flat-to-soft and traders will be eyeing the current account deficit (CAD) data to be released by RBI later in the day, which may have widened to 4 percent of GDP in the first quarter due to a surge in gold imports and a deteriorated trade gap. Government aims to contain current account 3.7 percent of GDP for the entire fiscal. The oil companies will also be reacting to the draft report of the panel of experts led by former Planning Commission member Kirit S Parikh who has suggested continuation of the current system of calculating revenue losses on the basis of trade parity and has asked to deregulate diesel prices in two years and favoured a monthly increase of Rs 1 to gradually align local prices with international rates. There is also likely to be buzz in the aspirants of new banking license, as a Standing Committee of Parliament headed by former Finance Minister Yashwant Sinha has recommended that industry and banking be kept separate, as it is not sure whether the safeguards put in place by the RBI including the fit and proper criteria, and group exposure norms would be effective enough to prevent banks promoted by industrial houses from cozying up to their industrial owners. There is also likely to be cautiousness related to a RBI report that has stated that the listed non-financial private companies on an average posted a decline of 10.9 per cent in net profit in the first quarter of the current fiscal.     

The US markets once again ended lower on concern of a government shutdown, traders also considered the mixed economic reports and preferred to remain on sidelines. The Asian markets have mostly made a weak start and some are trading lower by over a percent, while the Japanese market is leading the pack, down by around two percent eyeing the budget stalemate in US and as yen gained, weighing on exporters.

Back home, markets started the new F&O series on a weak note with the benchmark equity indices getting pummeled by around a percentage point on Friday, as investors adopted cautious stance ahead of the June-quarter current account deficit. The domestic benchmarks traded in a narrow range for most part of morning trades but a sharp wave of selling pressure, which emerged in last leg of trade, dragged the key gauges below their crucial 5,850 (Nifty) and 19,800 (Sensex) levels.  Earlier, domestic bourses, soon after a positive opening, entered into the negative terrain, as sentiments turned choppy after global credit rating agency Moody’s has said that uncomfortably high inflation coupled with supply constraints is impacting India’s growth that has slowed to 4.4 percent in the April-June quarter this year. Selling got intensified after fresh signs of euro zone economic fragility and rising political pressure in Italy hit the European markets, adding to wider market worries about a potential US government shutdown. Back home, intra-day reversal of Rupee, which pared all its morning gains, also weighed on the sentiment. The rupee was trading at Rs 62.34 per dollar at the time of equity markets closing compared with previous close of Rs 62.08 per dollar. Sentiment also got hurt after Barclays lowered India’s FY14 GDP forecast for the current fiscal to 4.7 per cent, saying the growth and fiscal health of the country are likely to remain under pressure, with 2014 election dynamics adding to uncertainties. Some support also came in after shares of three public sector oil marketing companies (PSU OMCs) viz. BPCL, HPCL and IOC gained as a strong rebound in rupee against the dollar this week has eased concerns of higher cost of crude oil imports. Additionally, Shipping companies continue their upward march and rallied up to 13 percent for the second day in a row after the Baltic Dry Index touched its highest level since December 23, 2011 on September 25, 2013. Finally, the BSE Sensex lost 166.58 points or 0.84%, to settle at 19727.27 while the CNX Nifty declined by 49.05 points or 0.83% to settle at 5,833.20.