Markets to get a cautious but positive start, may see volatility in second part

The Indian markets ended at a fresh record high on the eve of the election results, today is the big day for which markets have waited with baited breath. The start is likely to be cautious, though by the time markets starts trading first indications will start trickling in and that will guide the markets' further course of action. Though, there is lots of volatility expected by the noon when the whole picture will start getting clear with majority of the results announcements and traders will react in a big positive way if the results are on expected line, on the contrary if there is disappointment then there could be a large selloff too. Today, traders will be hardly paying any heed to any other development other than the election results but Reserve Bank of India Governor Raghuram Rajan saying that the best tool available with the central bank to control price rise is interest rate, may bring jitters to India Inc. struggling to keep pace with growth. Rajan has also stated that the new government will face four big challenges -- subdued growth, the fiscal and current account deficits and sticky inflation. Meanwhile, rupee movement too will be eyed as the day progresses, with industry body CII saying that exporters are unhappy with the strengthening of the local currency which makes Indian exports uncompetitive in the global marketplace. There will be lots of important result announcements too. Akzo India, Bajaj Hindusthan, Cadila Health, Chennai Petro, Oracle Financials, Puravankara Projects, Spicejet and Wheels India will be major companies to announce their numbers. The US markets continued their plunge for the second straight day on a negative reaction to a mixed batch of economic data. There was unexpected drop in industrial production in the month of April, while on other hand initial jobless claims fell. However, the major indices managed to end the session off their worst levels of the day. The Asian markets have made a mixed start with some indices trading notably lower in early deal, led by Nikkei which is down by around two percent as yen was near an eight-week high to the dollar. Back home, Indian equity benchmarks, recovering entire early losses, staged a smart comeback in the last leg of trade on Thursday and ended the session at their fresh record closing high levels, on hopes of BJP-led NDA winning the general elections. Earlier, key benchmark indices alternately swung between positive and negative terrain as investors remained cautious ahead of final results of elections on May 16, while markets seem to have more or less priced in the exit poll prediction of a majority for the BJP-led National Democratic Alliance (NDA) in the Lok Sabha. But, volatility ruled the roost in dying hours of trade with the frontline gauges witnessing a sharp jump as sentiments remained up-beat after the annual rate of inflation, based on monthly WPI, easing at 5.20% in month of April, 2014, as compared to 5.70% for the March and 4.77% during the corresponding month of the previous year, as all three major components of the index - food, fuel and manufactured goods - recorded moderation in prices. However, February inflation figures were revised upwards to 5.03% against 4.68% earlier. Some support also came in to the markets after India Meteorological Department (IMD) has predicted that the conditions for the advancement of South west monsoon are favourable and it will be hitting Andamans much earlier than expected. On the global front, Asian markets reversed most of the early losses and ended mostly in the green, while European shares traded marginally lower in early deals. Back home, buying which emerged in late trade mainly helped the domestic equity markets to re-conquer their crucial 7,100 (Nifty) and 23,900 (Sensex) bastions. Some support came in from currency front, where the rupee firmed up against the dollar and was quoting at Rs 59.30 at the time of equity markets closing as compared to Tuesday’s close of Rs 59.68 on the back of strong inflows in the domestic equity market. Meanwhile, recovery in banking counter too supported the sentiments, stocks like HDFC Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank etc. edged higher after the RBI panel had recommended a one-licence policy for all banks, irrespective of the ownership pattern. Finally, the BSE Sensex gained 90.48 points or 0.38%, to 23905.60, while the CNX Nifty was up by 14.40 points or 0.20%, to 7,123.15.