Markets to get a soft-to-cautious start after the big rally

The Indian markets went for a rally in last session, reacting positively to the announcements made in the interim budget. Today, the start is likely to be cautious and some profit booking too can be expected after big gains in last session. Meanwhile, Finance Minister P Chidambaram has defended his budget stand and said that the economy was stable as the government has pulled it back from where it was and expressed confidence that India will be in the high growth path. Today, the retail related stocks may see some action as the Commerce and Industry Ministry has asked the Law Ministry for its opinion on whether the Delhi and Rajasthan governments can reverse decisions to allow foreign retailers to start supermarket chains. The banking stocks may remain buzzing on a private survey that has said that gross non-performing assets (NPAs) of 40 listed banks shot up 35.2 per cent or Rs 63,386 crore in the nine months ended December 31, 2013. The PSU sectors too may seem some action, as the government has missed its disinvestment target for four consecutive financial years.

The US markets made a mixed closing after a long weekend, though Nasdaq ended higher but markets remained under pressure on weak economic data. The Asian markets have mostly made a weak start, snapping a three-day advance. The yen has strengthened against all its 16 major peers and has led to the decline in the Nikkei after huge surge in last session.

Back home, Tuesday proved a day of jubilation for the Indian markets that showed remarkable strength in the background of the ‘Vote on Account’ presented by the Finance Minister P Chidambaram. Benchmarks after making a cautious start kept on improving with every passing hour of trade, though the gains were not sudden and there was some profit booking too in the last, but major indices steadily moved up and by the end of the trade, easily cruised past the crucial psychological levels of 20600 (Sensex) and 6100 (Nifty). The gains were spread across the sectors and broader markets too participated equally in the upmove. The global cues however were not very supportive, while the Asian markets too made a mixed closing after Chinese policy makers drained funds from the financial system. The European markets though made a positive start but gave up their gains in very early trade ahead of the German investor-confidence data. Back home, the recoiling European markets too were unable to deter the domestic markets from inching higher and though the benchmarks gave up some gains in second half, they managed to post decent gains for the day. The markets gave a thumbs-up to the interim budget and all the sectors that directly got any advantage or were associated with budget proposals gained substantially. Banking was the top gainer for the day, up by over two percent on the BSE, mainly led by the gains in private sector banks. Meanwhile, the Finance Minister said that Reserve Bank of India (RBI) should strike a balance between price stability and growth when announcing its monetary policy. The decision of Finance Minister P Chidambaram to bring down excise duty on capital goods from 12 per cent to 10 per cent gave a breather to the sector. Separately, the metal stocks remained in upbeat mood since morning on value-buying, as the excise reduction in auto will impact the steel sector positively and also as investors bet on higher global prices with a spurt in Chinese buying. Chinese imports surged 53.2 percent in January from a year ago to a record high. There was some upmove in the gold related stocks after the report by World Gold Council that India's gold demand remained buoyant in 2013 and rose by 13% to 975 tonnes compared to 2012, despite government putting in several restrictions to curb imports. However, the defensive FMCG sector remained under pressure since beginning and ended as the laggard on the BSE. The IT and Tech sector stocks too came under pressure in final hours, as the rupee depreciated on pent-up dollar demand due to extended weakened in the US markets. Finally, the BSE Sensex gained 170.15 points or 0.83%, to settle at 20634.21, while the CNX Nifty added 53.80 points or 0.89% to settle at 6,127.10.