Markets to get a cautious start; may see some recovery in latter trade

The Indian markets suffered sharp profit booking in last session on getting weak macro data, though the start of the official earnings season was good but traders turned cautious of the economic conditions. Today, the start is likely to remain cautious, as traders will be reacting to the rise in CPI numbers announced after the market hours, which has dashed hopes of any rate cut for India Inc. The inflation concern is likely to linger further with a private forecast that India should prepare for below normal rainfall in the crucial monsoon season this year, particularly in the agriculturally significant north-western and western central regions. However, some recovery can be expected in the latter part of the day and export oriented stocks may lead the gains with exporters body FIEO, based on the WTO’s projections of global trade saying that India’s exports are likely to grow by at least 10 percent in 2014. Meanwhile, amid the election euphoria the global rating agency Standard & Poor’s has said that the direction and pace of policy reforms, more than which party takes control after the general elections, can affect India's sovereign rating. There will be some buzz in the aviation sector too, as the directorate general of civil aviation (DGCA) has stipulated that foreign carriers or investors will not have the right to control a local airline. There will some important result announcements too, to keep the markets ticking. Indusind Bank, Jay Bharat Maruti, Mindtree, Reliance Indl Infra and TCS will be reporting their numbers today. The US markets managed a green close despite a volatile day of trade in last session, traders reacted to some positive earnings announcements, while there was some concern on disappointing homebuilder confidence data. The Asian markets have made mostly a positive start tailing US cues and as China reported economic growth that was faster than estimated. Gross domestic product of the country rose 7.4 percent in the first quarter, though the expansion slowed from a previously reported 7.7 percent in the fourth quarter. Back home, Tuesday’s trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 6750 (Nifty) and 22,500 (Sensex) levels. Sentiments were weighed down after whole-sale-price inflation in March hit 3-month high, which could lead to delay in policy rate cuts by the central bank in the near to medium term. Earlier, markets made a positive start with Infosys heralding the result season with a decent set of numbers. The company posted a rise of 25.07% in its net profit at Rs 2883 crore for the quarter ended March 31, 2014 as compared to Rs 2305 crore for the same quarter in the previous year. However, the gains were short-lived as weakness on the financial counters negated the gains on the IT counters. Traders also reacted negatively to different macro data, starting with the IIP numbers announced late Friday, which slipped to its 9-month low, showing de-growth of 1.9% in February as compared to marginal expansion of 0.1% in January. Sentiments also remained dampened after the wholesale price index (WPI) based inflation rose to 5.70% in March from a nine-month low of 4.68% in February. The inflation stood higher in all the three broad categories -- primary articles (unprocessed items), fuel and power and manufactured goods. Food inflation went up to 9.90% in March from 8.12% in February. With fears of El Nino hitting the monsoon, food inflation may see further rise in the coming months. On the global front, Asian markets ended mostly in the green led by Japanese Nikkei, however, European markets trades mostly in the red in early deals as fresh tension in Ukraine prompted investors to shun cyclical sectors such as travel, autos and technology. Back home, shares related to metal and mining space like Hindalco, Sesa Sterlite, Tata Steel etc edged lower as China’s broadest measure of new credit fell 19% in March from a year earlier and money supply grew at the slowest pace since 2001. Moreover, bank stocks declined after the latest data showed the rate of inflation based on wholesale price index (WPI) accelerated in March 2014. On the flip side, shares of information technology companies remained on buyers’ radar after Infosys surprised the Street with a 4.1% q-o-q rise in its net profit for the fourth quarter ended March 2014 (Q4) at Rs 2,992 crore. Finally, the BSE Sensex plunged by 144.03 points or 0.64%, to settle at 22484.93, while the CNX Nifty declined by 43.20 points or 0.64% to settle at 6,733.10.