Markets likely to extend the last session weakness with a soft start

The Indian markets lost their momentum in the later part of the trade in last session, Moody's retaining outlook on India's sovereign credit rating at ‘stable’, too was unable to help the markets and the RBI measures were felt short of expectation. Today, the start is likely to be weak to cautious; rupee movement will be keenly eyed after markets shrugged off the package, which included increased limits for foreigners to buy Indian debt and for local firms to borrow overseas. However, infra stocks are likely to get some boost as planning commission deputy chairman Montek Singh Ahluwalia has said that after RBI government will now take more steps to clear infrastructure bottlenecks in a prioritized manner to stimulate economic growth. There will be lots of scrip specific actions to keep the markets buzzing.

US markets made a weak start of the new week and most of the major indices closed sharply lower by over a percent on worries of European crisis, especially the Spain, as there was very little detail about how much aid Spain would be requesting, and the banking shares were the most to suffer on concern about their exposure to European banks. The Asian markets have made a soft start and most of the indices are trading lower for the fourth day in a row. Investors are concerned that the European crisis might not get a solution even in this weeks’ meeting. Meanwhile it was reported China has no imminent plans to introduce more stimulus policies to help revive vehicle demand in the world’s biggest auto market.

Back home, it turned out to be a disappointing performance from the stock markets in India on the first day of June series futures and options expiry week as the benchmark equity indices failed to snap the session in the green territory and settled with over half a percent cuts. The frontline equity indices traded on a sanguine note for most part of the day amid growing optimism that the government would unveil measures to boost Asia’s third largest economy and shore up the falling rupee. The frontline gauges even looked set to breach the psychological 17,150 (Sensex) and 5,200 (Nifty) levels in the session as investors continued to show across the board buying interest. However, the domestic markets took a turn for the worse in late hours of trade as investors started to square off hefty positions across the board after Reserve Bank of India (RBI) announced various steps to bolster the beleaguered rupee, including increasing the limit on foreign investment in government bonds by $5 billion to $20 billion, which would allow companies to borrow more from overseas to pay back their high cost rupee loans. Market participants expressed disappointment over the measures announced by RBI as most believed that the measures would be beneficial for the bond markets in the long run however they doubted the measures’ sustainable impact on the rupee. Traders also eyed the movement of rupee, which after appreciating to 56.4 against a dollar, retreated to previous closing levels and undermined market sentiments. Meanwhile the reports that global rating agency Moody's retained outlook on India's sovereign credit rating at ‘stable’ despite slowdown in GDP growth rate saying that it is unlikely to be even a medium-term feature, largely went unnoticed as it failed to prop up investors’ morale. On the BSE sectoral space, the rate sensitive Bankex counter, which at one point in time traded as top gainer eventually settled with over a percent cuts, being the top laggard in the space. The Power and PSU pockets too got pummeled by close to a percent and pressured the benchmarks. Amid the across the board profit booking the consumer Durables index was the only counter, which managed to keep its head above the water and settle with marginal gains.Finally, the BSE Sensex lost 90.35 points or 0.53% to settle at 16,882.16, while the S&P CNX Nifty declined by 31.40 points or 0.61% to close at 5,114.65.