Markets likely to start on a cautious note on weak global cues

The Indian markets went through a phase of consolidation in last week, though indices managed to eke out some gain but concern relating to global growth outlook kept looming large. Today, the start of the new week is likely to remain cautious as the global cues are not looking favourable, while the traders will be taking a wait and watch stand with the start of the earnings season this week. Traders will also be looking for the progress of southwest monsoon, which has hit the worst deficit in a decade for further cue, while the rupee movement too will be watched, though it has been reported that foreign investors poured in over Rs 5,200 crore in the equity market in just four trading sessions of the month after Prime Minister took the charge of Finance Ministry. The  state owned oil marketing companies might get some support with Planning Commission Deputy Chairman Montek Singh Ahluwalia saying that fuel price adjustment has to be made “at some point of time” to get investments back. Meanwhile, there is likely to be a buzz in the markets with regulator, Sebi planning to set up an independent SRO (self-regulatory organisation) for stock exchanges, though keeping the day-to-day trading regulations and surveillance actions with the bourses themselves.

The US markets closed lower on Friday on getting weak jobs data, hiring slowed sharply in the second quarter and unemployment remained unchanged for the month of June. Also there was European, as well as slowing global economy concern that weighed on the sentiments of the markets. The Asian markets have made a weak start with most of the indices trading lower by over half a percent on weak data from US and within the region, Japanese machinery orders fell more than expected, while Chinese Premier Wen Jiabao said that country's economy faces “relatively large” downward pressure.

Back home, after showing some signs of coming out of the consolidation mode in the previous session, stock markets in India failed to capitalize on the momentum and snapped yet another range bound session on a flat note. The last trading session of July’s first week was characterized by choppiness as the key indices gyrated in a tight range through the day. Investors lacked conviction to open fresh positions amid lot of uncertainties surrounding the domestic as well as global markets. The psychological 5,300 (Nifty) and 17,500 (Sensex) levels proved as strong supports as the key gauges managed to settle above those levels by the end. The key gauges displayed listless performance through the day as the aimless benchmarks appeared exhausted and showed only sideways kind of movement in a tight band, lacking any significant upside triggers. Besides, market participants globally also fretted over the fact that the policy makers too are concerned about the gloomier economic prospects after the ECB and People’s Bank of China cut their benchmark borrowing costs, while the Bank of England raised the size of its asset-purchase program. On the domestic front, cues from the money market remained pessimistic as Indian rupee extended its depreciating run for the third consecutive session and drifted closer to the 55 levels against the US dollar. Meanwhile, the upside for domestic markets was also capped after Planning Commission Deputy Chairman Montek Singh Ahluwalia stated that achieving average growth rate of 9 percent in the 12th Five Year Plan will not be possible given the deteriorating global economic situation over the last one year, however he felt that growth rate of 8-8.5 percent in five year period would be feasible. On the BSE sectoral space, the high beta Realty sector sank by over a percent and remained the top laggard in the space followed by the Metal pocket, which too plummeted over a percent and restricted the markets from moving in to the green territory. On the other hand, the defensive FMCG counter along with the rate sensitive Bankex index remained the only indices, which kept their heads above the water and supported the benchmark indices. The BSE Sensex eased 17.55 points or 0.10% to settle at 17,521.12, while the S&P CNX Nifty fell by 10.35 points or 0.19% to close at 5,316.95.