Thursday 10 October 2013

Markets to see some consolidation after a day of big rally

The Indian markets got a runaway rally in last session on getting a better than expected trade data that eased the concern of current account deficit breaching the estimated limit. Today, the start is likely to be in green but some consolidation too can be expected after a big rally and tailing cautiousness in the global markets. Traders will wait for Infosys numbers slated to be announced tomorrow for any further cues. However, there will be some concern with the International Monetary Fund, after a day of lowering its growth forecast for India has said that the country’s fiscal deficit is expected to increase to 8.5 percent of the GDP this financial year, mainly due to the downward revision in GDP growth, depreciation of rupee and higher global oil prices. On the other hand, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said that India’s GDP will see a turnaround in the coming quarters on account of various steps taken by the government to spur growth as well as good agricultural production. There will be some disappointment in steel stocks, as the government has ruled out export duty cut on iron ore. Producers have asked for a reduction in a bid to push exports. There will be some buzz on the street with market regulator Sebi proposing to put in place a uniform policy for trade cancellation following recent incidents of freak trades on leading stock exchanges.

The US markets got some respite on Wednesday, though the major indices made a mixed closing but the trade remained choppy amid the continued concerns about the ongoing government shutdown with traders cheering the nomination of Janet Yellen as Federal Reserve Chairman. The Asian markets have made a mixed start; most of the indices have turned green on hopes of US gridlock to be resolved soon. The Japanese market has moved higher as the yen weakened against dollar.

Back home, Indian equity benchmarks, despite negative opening, snapped the session near their high point of day, as investors turned bullish following better-than-expected trade deficit data in September. Earlier, the markets opened in the red following report that International Monetary Fund (IMF) further cut India’s current fiscal growth projection to 3.8% from 5.6% as projected in July and 5.7% as expected in April. It has said that growth in India has slowed down more than anticipated and the country must maintain fiscal and monetary credibility in order to prevent capital outflows. But, sentiments took u-turn after India’s trade deficit narrowed to a two-and-a-half-year low at $6.76 billion in September, compared with $10.9 billion in August, after India’s exports posted double digit growth for third consecutive month, and with imports sliding for the fourth month in a row. Meanwhile, India’s exports during September, 2013 grew by 11.15% at $27.68 billion as compared to $24.90 billion during September 2012, thanks to stronger demand from Western nations and increased competitiveness. On the same time, steep decline of imports for fourth consecutive month was witnessed on account of sharp slide of gold imports to $0.8 billion in September as compared to $4.6 billion in September 2012. After the trade data, there appeared not even an iota of profit booking in the session, as the benchmarks managed to fervently gain from strength to strength as investors continued hunt of fundamentally strong but oversold stocks. Frontline indices managed to finish the session above their intraday high and settled comfortably above 6,000 (Nifty) and 20,200 (Sensex) levels as investors took to hefty across the board buying. On the global front, most of the Asian equity benchmarks, after a negative opening, ended the session in the green as sentiments turned positive on report that President Barack Obama will nominate Janet Yellen as Federal Reserve chairwoman. Recovery in Indian rupee too boosted the markets up-move, while the rally in auto counter supported the sentiments with stocks like TVS Motors, Bajaj Auto, Hero Motocorp, Tata Motors etc edging higher as festive season kicks in. Additionally, banking stocks like Bank of India, YES Bank, IndusInd Bank, Bank of Baroda, HDFC Bank and Kotak Mahindra Bank too edged higher after September trade deficit narrowed at $6.7 billion against $10.91 billion in August. Finally, the BSE Sensex surged 265.65 points or 1.33%, to settle at 20249.26, while the CNX Nifty gained 79.05 points or 1.33% to settle at 6,007.45.

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