Markets may consolidate after a good bounce back in last session

The Indian markets bounced back to close with gains of over a percent in last session, the dismal IIP numbers bolstered hopes of another rate cut in RBI’s upcoming policy review. Today, the start is likely to be flat-to-cautious and some profit booking too can be expected in the early trade. Investors will watch the development in European markets for further move. However, in a bid to abate skepticism over the current business environment in the country, external affairs minister S M Krishna has said that India will restore investor confidence and regain economic momentum. The auto stocks are likely to be under pressure as there is a buzz that diesel cars may get expensive by Rs 2.55 lakh, with the oil ministry plan of imposing a special tax on diesel using vehicles. On the same time telecom stocks might move higher, as the Reserve Bank of India has approved the proposal to allow mobile phone companies to mortgage airwaves that will allow the companies to use spectrum as collateral and raise funds from banks for the upcoming auctions.

The US markets made a good comeback on Tuesday recovering all their last session losses after Spanish bond yields came off earlier highs and as investors focused on the possibility of more monetary stimulus from the Federal Reserve. Though, anxiety about Greece’s general elections remained in the market but traders took cue from one of the Federal Reserve Bank’s president who stated of favouring an accommodative policy. The Asian markets have made a mixed start with some of the indices trading lower by over half a percent amid lingering European concerns. Chinese market was trading marginally higher on speculation that the government will go for some more measures to bolster the economy as Europe’s debt crisis threatens to undermine the nation’s exports. Japanese Nikkei was the top gainer in the region as country’s machinery orders increased more than expected in April.

Back home, after a day’s consolidation, stock markets in India returned back to their winning ways with the frontline equity indices staging an exuberant performance and closing in the positive terrain for the sixth time in last seven sessions. The benchmark gauges fervently rallied over a percentage points and re-captured the important psychological 5,100 (Nifty) and 16,800 (Sensex) bastions. The day’s performance looked even more prominent since it came on a day when equity indices across Asia settled with notable losses while European counterparts traded on a positive note, but failed to match the fervor with which the Indian bourses rallied. Domestic markets got off to a weak start as they carried forward the pessimism from the previous session while sentiments across global space too remained discouraging. After trading on a subdued note for most part of morning trades, the local benchmarks showed renewed strength in afternoon trades as supportive cues from the European markets propelled the domestic markets to higher levels. On the domestic front, market participants went on to overlook the disappointing industrial production numbers for April that showed IIP expanded at a frustratingly slow pace of 0.1% in the month of April, indicating gloomy economic growth prospects. Sentiments got support from speculations that the Reserve Bank of India in its mid-quarter policy review on June 18 will be compelled to cut key interest rates irrespective of what the headline inflation number may show on June 13, in order to bring Asia’s largest economy out of the doldrums. Meanwhile, the beleaguered rupee, which extended its streak of appreciation in morning, came off the highs of the day and eased investors’ concerns to some extent. On the BSE sectoral space, investors added hefty positions in the high beta Realty and rate sensitive Bankex counters, which surged by two percent amid rising hopes that RBI, would resort to monetary easing measures to prop up the flagging economic growth. The capital goods pocket too amassed close to two percent gains in the session despite the IIP data showing frustratingly slow growth. Though largely across the board buying was evident, investors exerted some selling pressure on the defensive Healthcare pockets, which went home with moderate cut of around half a percent. Finally, the BSE Sensex gained 194.79 points or 1.17% to settle at 16,862.80, while the S&P CNX Nifty rose by 61.80 points or 1.22% to close at 5,115.90.