Indian stocks to open sideways: Friday Market Preview

Stock-specific action will give the market some direction today

The Indian bourses are likely to open sideways on the back of mixed cues from the global arena. Wall Street settled mixed overnight on mixed economic data while issues related to the European debt crisis kept investors guarded. Markets across Asia were mostly lower in early trade as the Greece crisis weighed on the sentiments. The SGX Nifty was 11 points lower at 5,398 compared to its previous close of 5,409.

On the domestic corporate front, the management of Maruti Suzuki late last night announced the end of the 13-day strike at its Manesar plant. Also, Tata Steel yesterday said it has sold its 26.27% stake in Australian coal miner Riversdale to global mining major Rio Tinto for A$1.06 billion ($1.11 billion). “The sale consideration of about A$1,060 million (about Rs5,074 crore) represents around 100% appreciation of value in less than four years since the first investment,” the Indian steel major said in a statement. The two stocks will be in focus today.

While the market had factored the Reserve Bank of India's (RBI) 25 basis point hike in key rates, Thursday’s decline was largely on account of economic issues across the world, which will eventually impact growth in India.

The market opened lower on nervousness ahead of the RBI's monetary policy review and global worries arising from fears of the debt crisis in Greece spreading to other countries in the Eurozone. The Sensex opened 72 points lower at 18,060 and the Nifty resumed trade at 5,420, down 28 points from its previous close. Rate-sensitive sectors like banking, realty and auto saw selling pressure in early trade.

The market continued to trade sideways, till the announcement of a 25-basis-point increase in key rates by the RBI, which was in line with market expectations. Buying in select counters saw the market recover its losses and almost touching its previous closing level. At the day's high, the Sensex added 32 points to 18,155 and the Nifty was at 5,448, its closing figure on Wednesday.

However, the gains were short-lived as choppiness led the indices lower in subsequent trade, as key European markets were marred by the debt issue in Greece. US stock futures, which were in the red, also added to the woes. The market touched its intra-day lows in late trade, with the indices falling below their psychological levels. Finally, the Sensex closed at 17,986, a decline of 146 points and the Nifty finished trade at 5,397, down 51 points. The Nifty traded below the first support of 5,450 today and closed much below it. It is likely to go down to 5,350, subject to minor rallies.

Key indices in the US ended mixed on Thursday on mixed economic news but continuing debt issues in Europe kept sentiments lower. Housing starts rose more than expected and permits for future construction touched a five month high in May. Also, initial jobless claims fell to 414,000 in the latest week from an upwardly revised 430,000 in the previous week. However, markets turned briefly negative after news factory activity in the US Mid-Atlantic region unexpectedly shrank to its lowest level since July 2009 from the month before, according to the Philadelphia Federal Reserve Bank.  

This apart, the US current account deficit increased in the first quarter on strong imports. The deficit represented 3.2% of US gross domestic product, up from 3% in the fourth quarter.

However, the Greek government’s failure to gain support for additional austerity measures is seen as a setback.

The Dow rose 64.25 points (0.54%) to 11,961.52. The S&P 500 added 2.22 points (0.18%) to 1,267.64. The index has dropped 7% from its 29th April closing high. On the other hand, the Nasdaq fell 7.76 points (0.29%) to 2,623.70.

Most markets in Asia were lower in early trade on the last trading day of the week as the Greece debt crisis is expected to dent the outlook for exporters in the region. Rate-tightening measures across the sub-continent are impeding the realty industry in Asia.

The Shanghai Composite declined 0.12%, the Hang Seng fell 0.21%, the Nikkei 225 shed 0.01%, the Straits Times was down 0.14%, the Seoul Composite shrank 0.61% and the Taiwan Weighed fell by 0.19%. On the other hand, the Jakarta Composite gained 0.38% and the KLSE Composite rose 0.55%.

Back home, the Securities and exchange Board of India (SEBI) on Thursday relaxed its Investor Protection Fund (IPF) guidelines in favour of brokers by stipulating that surplus amount after satisfying all claims be returned to them.

As per the earlier rules, such amounts used to be credited to the IPF/Customer Protection Fund (CPF).

In its latest circular, SEBI said that stock exchanges had sought exemption from strict compliance of the earlier rules “on the ground that the residual amount remaining after satisfaction of claims against the defaulting broker should be refunded to the broker and not credited to the IPF/CPF”.

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