Markets to get a soft start on feeble global cues

The Indian markets sold off their good start in last session and ended with modest gains, the euphoria of RBI’s measures faded up soon on global concern. Today, the start is likely to be soft, tailing the global cues and traders will be eyeing the trade deficit data for the month of September, scheduled to be announced later in the day. India's trade deficit narrowed to $10.9 billion in August, helped by a double-digit rise in merchandise exports. Meanwhile, RBI Governor Raghuram Rajan has said that he aims to build sophisticated financial infrastructure in three years that will facilitate trillion-dollar core sector investments, leading to sustained economic growth. However, there will be concern in the market with the International Monetary Fund (IMF) further cutting India’s current fiscal growth projection to 3.8% from 5.6% as projected in July and 5.7% as expected in April. It has said that growth in India has slowed down more than anticipated and the country must maintain fiscal and monetary credibility in order to prevent capital outflows. There will be some buzz in the power sector, as the government is planning to invite global bids for a dozen interstate transmission projects worth over Rs 20,000 crore in the next two.

The US markets suffered sharp plunge on Tuesday on worries about the impact of the ongoing government shutdown. Lawmakers remain at an impasse even as the government shutdown enters its second week. The Asian markets have made a mixed start with some of the indices trading lower by over a percent on US concern and as the IMF cut its global outlook, though the Japanese shares reversed losses after the yen weakened.

Back home, Indian equity benchmarks, after a solid start, came off their day highs in final hours of trade, amid a weakening rupee, though managed to end slightly higher on Tuesday led by buying in select rate-sensitive counters. Earlier, domestic gauges made a gap-up start after the Reserve Bank of India (RBI), in a surprise move, eased the liquidity tightening measures it had initiated earlier, by reducing the marginal standing facility (MSF) rate by a further 50 basis points (bps). This is the second time in less than a month that the central bank has cut the key overnight interest rate, taking advantage from the rupee’s recent surge. Sentiments also remained up-beat on report that foreign institutional investors (FIIs) bought shares worth a net Rs 494.13 crore on October 7, 2013.  Positive trade in Asian counters too provided some support to domestic markets with most of the regional bourses ending the session in the green despite investors warily watching the uncertain political standoff in the US over raising the country’s debt ceiling. However, sluggish opening in European counterparts dampened the sentiments. Back home, buying in rate sensitive counters like banking and realty continued to support markets as stocks related to these sectors edged higher after RBI announced measures to improve liquidity conditions in the banking system. Some support also came in from buying in auto sector on report that domestic car sales improved for the first time this fiscal with the industry selling 1.56 lakh cars during September, up by 0.73% from a year earlier 1.54 lakh. However, the uptick remained limited on account of high interest rates and fuel costs. Stocks related to telecom sector viz. Bharti Airtel, Idea Cellular and Reliance Communication edged higher after the Department of Telecommunications (DoT) slashed the proposed one time charge to Rs 1,989.18 crore from Rs 2,764.29 that was originally demanded for airwaves held by nine mobile phone companies whose permits were quashed by Supreme Court in February 2012. However, gains remained capped after Indian rupee depreciated due to dollar demand from private sector oil marketing companies. Finally, the BSE Sensex gained 88.51 points or 0.44%, to settle at 19983.61, while the CNX Nifty added 22.25 points or 0.38% to settle at 5,928.40.