Indian markets to mirror global sell-off with a soft start

The Indian markets showed some volatility but managed a modestly positive close in last session. Today, the start is likely to be soft to cautious going for a long weekend. Traders will be concerned by the global sell-off and caution of the Reserve Bank of India (RBI) governor Raghuram Rajan, who has said that if the spillover effect of monetary easing in the US was not controlled; emerging markets like India would be forced to build large foreign exchange reserves through aggressive intervention in the foreign exchange markets. He also said that a very accommodative monetary policy can lead to more problems for an economy rather than help sustain growth. IT sector is likely to come under pressure impacted by the selling in global peers. There will be some buzz in the banking sector, as the RBI has urged banks to stick to policies approved by their respective Boards while investing in real estate or carrying out transactions related to realty at overseas branches. Also, an RBI appointed panel has backed sweeping changes in the way bank fix interest rates and end the discrimination of old customers. The US markets suffered sharp cuts led by sell-off in technology stocks and profit booking after big gains of previous session. However, the economic news remained good and initial jobless claims fell to a nearly seven-year low in the week ended April 5th. The Asian markets have made mostly a weak start on reduced demand for riskier assets tailing the fall in US markets, though China’s producer-price index retreated following the previous month’s 2 percent drop. Back home, Indian equity benchmarks ended the volatile session of trade on a flat note on Thursday, a day after touching their fresh all-time closing high levels. The bourses went through volatility where benchmarks, despite making decent opening, slipped into red for a couple of times during the session. Investors in last leg of trade turned cautious and booked profit ahead of the Infosys’ fourth quarter performance which will set the tone of earnings season for the January-March quarter. Overall, sentiments remained up-beat after World Bank projected an economic growth rate of 5.7 percent in fiscal year 2015 for India on the back of a more competitive exchange rate and many large investments going forward. Investors’ confidence also got boost with report that India Inc raised $2.72 billion more through external commercial borrowings (ECB) in the first 11 months of financial year 2013-14 on the back of better business environment. Some support also came in on report that foreign institutional investors (FIIs) bought shares worth a net Rs 1043.86 crore on April 9, 2014, as per provisional data from the stock exchanges. Supportive cues from US markets led the gains in local markets and sentiments remained up-beat following the release of the minutes of the latest Federal Reserve meeting. Asian markets too ended mostly in the green; however, disappointing start of European markets took their toll on domestic sentiments and capped the gains. Back home, selling pressure in software manufacturer Infosys, cigarette to hotel conglomerate ITC and private lender ICICI Bank pulled the benchmarks lower in dying hour of trade. Meanwhile, stocks related to healthcare space which witnessed splendid run in last few sessions witnessed massacre in today’s trade. Software and technology counters too witnessed selling pressure as investors remained concerned ahead of the release of quarterly earnings next week. On the flip side, steel stocks like Tata Steel, JSW Steel, SSLT and SAIL all edged higher on the World Steel Association (WSA) statement that India’s steel demand may grow 3.3 per cent this year on higher demand from construction and manufacturing sectors. Stocks related to aviation stocks too remained on buyers’ radar, as the SEBI is likely to pass final order on Jet Airways, Etihad Airways deal soon. Finally, the BSE Sensex gained 12.99 points or 0.06%, to settle at 22715.33, while the CNX Nifty added 0.20 points to settle at 6,796.40.