Markets to get a soft start on weak global cues

The Indian markets consolidated in last session and some profit booking was seen in the IT stocks after the weak Q4 guidance of TCS. Today, the start is likely to be a bit soft tailing the weakness in the global markets and Nifty may retest the 6500 level again, there will be concern of foreign fund outflow, however bullishness owing to the upcoming general elections is likely to prevent any major fall in the market. Also, the IT sector may see some recovery after a steep fall in last session, as the industry body Nasscom admitting that the domestic story has not been good in the country, has said that though US market is looking up, the industry should open up new fronts such as China, Japan, South Korea and Africa. There will be some action in the money market, as the finance ministry would like the Reserve Bank of India (RBI) to intervene more frequently in the currency market to smoothen volatility, build reserves when the rupee strengthens and use this to bolster the currency when it weakens. There will be some buzz in the sugar stocks too, as India’s recent decision to give subsidies to exporters of raw sugar is facing international flak with many countries questioning its validity under global trade rules.

The US markets weakened in last session reacting negatively to the Federal Reserve’s monetary policy announcement were Fed Chair Janet Yellen signaled it may raise US interest rates from the middle of next year. The Asian markets have made a soft start as US Fed cut monthly purchases of Treasuries to $55 billion and indices in the region were concerned about the Fed statement that the time between the end of bond-buying and rate increases could be on the order of “six months.”

Back home, Indian equity benchmarks witnessed consolidation near their all time high levels on Wednesday amid profit booking in software and technology counters. Investors also remained on sidelines ahead of the US Federal Reserve policy review. Earlier, bucking sluggish trend in regional counterparts, domestic bourses made a positive start as sentiments remained up-beat on report of Standard & Poor’s Ratings Services that Indian companies are improving their credit profiles by selling equity and assets, or using free operating cash flows to reduce debt. However, sentiments got dampened in last leg of trade as investors resorted to profit booking especially from selling in software and technology pockets, which remained in somber mood since beginning, after sector major Tata Consultancy Services (TCS) hinted a subdued Q4 growth based on potential impact from seasonally slower demand in its biggest markets and continued demand volatility at home that the company flagged back in November. Moreover, the company’s CFO Rajesh Gopinathan in an analyst meet indicated that EBIT margins of the company could fall by 40-50 bps quarter-on-quarter and apart from softness in overseas revenues, the Lok Sabha polls would impact domestic revenue. Global cues too remained subdued as European counters made a sluggish start with CAC and FTSE trading lower in early deals. Asian markets too ended mostly in red as investors remained concerned about the company earnings and awaited the Federal Reserve’s policy statement. Back home, stocks of public sector oil marketing companies viz. BPCL, HPCL and IOC edged lower despite report that the loss on sales of diesel has been trimmed by more than Re 1 to Rs 7.16 per litre on the back of softening international oil rates. On the other hand, stocks related to Metal sector remained on buyers’ radar for yet another day as institutional investors have started showing interest in the sector after its severe fall in the beginning of the year. Additionally, select stocks from Infra space edged higher, as the Planning Commission Deputy Chairman Montek Singh Ahluwalia said that efforts to revive infrastructure investment would help in reverting to 8 percent growth in next three years. Finally, the BSE Sensex ended almost flat, up by 0.25 points to settle at 21832.86, while the CNX Nifty was up by 7.40 points or 0.11% to settle at 6,524.05.