Markets to get a quiet start; to take direction from RBI credit policy review

The Indian markets after a rangebound trade closed flat in last session, the gains in rate sensitives’ and technology counters were weighed down by sharp losses in metal and oil & gas counters. Today, is a big day for the markets as Reserve Bank of India (RBI) will come up with its review of credit policy. Though, RBI is not expected to cut interest rates at its review due to inflation worries, but it may cut the cash reserve ratio (CRR) for banks as a way to relieve tight liquidity. The RBI review points on Monday admitted its own growth outlook has weakened but is more worried about inflation remaining a risk to the system. In its Macroeconomic and Monetary Developments Third Quarter Review 2011-12 RBI has said that Upside risk to inflation remains due to“insufficient supply responses, exchange-rate passthrough, suppressed inflation and expansionary fiscal stance. There will be buzz in the telecom circles as well as Sunil Bharti Mittal, Anil Ambani will meet telecom minister Kapil Sibal along with other heads of telecom companies. This meeting is a follow up on issues raised with the Prime Minister in November 2011.

Also, there will be lots of result announcements to keep the markets buzzing. Biocon, Cairn India, Ceat, Grasim Inds, Lupin, Yes Bank, Indiabulls Real Estate, Indiabulls Power, Mangalore Refinery are among the many to announce their numbers today.

The US markets closed flat though there were no domestic cues, the anxieties over Europe remain. Greek debt talks were said to be progressing, but there was no official announcement for any deal to scale back the nation's overwhelming debt load. Most of the Asian markets still remain closed though those who are trading have made a positive start on optimism that European policy makers are making progress to tame the region’s debt crisis.

Back home, after showcasing a close to four percent rally in the week gone by, Indian benchmark equity indices consolidated their position around the previous closing levels on the first trading session of the holiday shortened F&O expiry week. The psychological 5,050 (Nifty) and 16,800 (Sensex) levels proved as stern resistances as the key gauges failed to surmount those levels by the end. The key gauges displayed listless performance through the day as the aimless benchmarks appeared exhausted and showed only sideways kind of movement in a tight band, lacking any significant upside triggers. The session was solely dedicated to sideways as investors awaited the announcement of all important RBI monetary policy action which is scheduled on January 24. While consensus estimates are that the Indian central bank will keep both repo and reverse repo rates unchanged at 8.5% and 7.5% respectively however, there are some expectations that the RBI will commit to open market operations (OMO). The main trade-off for policy action is between inflation and economic growth, and with recent economic indicators signaling growth picture is not as bad as feared, inflation will continue to be RBI’s focus. The plunge of about three percent in index heavyweight Reliance Industries on the back of its disappointing third quarter earnings announcement prevented the upside chances for the frontline gauges in the session while other bellwethers like L&T, Maruti Suzuki, Sterlite too announced their third quarter earnings on Monday. While stocks like L&T and Maruti got commended for the performance by investors, however, Sterlite reported its third quarter earnings which were not in line with street’s expectations and got punished for its unimpressive performance. Earlier on Dalal Street, the benchmark got off to a soft start in the morning trade tracking the lackluster moves in Japanese markets on a day when most Asian markets were off on extended weekend. The indices kept see-sawing around the neutral line as they moved only sideways through the day’s trade. After touching intraday lows in early noon trades the gauges recovered to intraday highs in mid noon trades but only to eventually settle in close proximity with previous closing levels. On the BSE sectoral space, defensive-FMCG counter remained the top gainer in the space with gains of about a percent while the high beta Realty sector along with TECk pocket too gained a lot of traction and settled with similar gains. On the flipside, the Metal counter remained the top laggard with over two percent cuts after heavyweight Sterlite plunged over five percent post announcing disappointing results. Finally, the BSE Sensex rose 12.72 points or 0.08% to settle at 16,751.73, while the S&P CNX Nifty lost 2.35 points or 0.05% to close at 5,046.25.

US markets made a mixed closing on Monday; the euro zone debt crisis was still looming large pressuring market sentiment, as Germany and France pushed for a deal between Greece and its private creditors and said they remained dedicated to a new bailout that is needed by March to stave off a default. The indices surged in opening trade but the enthusiasm fizzled out midday and despite recovering in late trade they managed just a flat closing. With no major economic reports, investors largely stayed on the sidelines.

Meanwhile, the Federal Reserve starts a two-day meeting on Tuesday, and for the first time ever, the central bank will release forward-looking forecasts for the federal funds rate.

The Dow Jones industrial average closed lower by 11.66 points, or 0.09 percent, to 12,708.82. The Standard & Poor's 500 Index was marginally up by 0.62 points, or 0.05 percent, to 1,316.00, while the Nasdaq Composite Index was down by 2.53 points, or 0.09 percent, at 2,784.17.

Crude oil prices finally halted the downtrend on the first day of a new week amid heightened concerns over crude supply disruption after European Union ministers decided upon intensifying existing sanctions on Iran over its nuclear ambitions. Iran too retaliated by warning to block the Strait of Hormuz, the transit point for about a fifth of global oil.  The oil prices also got supported from the depreciation in American greenback against the euro after reports suggested that negotiations between Greece and private creditors made tangible progress.

Benchmark crude for March delivery surged $1.25 or 1.3% to $99.58 a barrel after trading as low as $97.40 a barrel in electronic trading on the New York Mercantile Exchange. In London, March Brent crude climbed $0.72 or 0.6% to $110.58 a barrel.