Indices Close Lower On Selling Pressure

The markets witnessed some selling in this week. The Sensex and Nifty closed the week in the red, declining by 1.68% and 1.75% respectively.

Apart from this, the cabinet nod for regulation of the real estate sector was the other important development over the week. In a crucial meeting on Tuesday, June 5, the cabinet cleared the Real Estate (Regulation and Development) Bill 2013, which calls for setting up real estate regulators for residential buildings. Under this bill, it is proposed that regulators be set up in each state, and that all real estate builders and developers mandatorily register themselves with the regulator. In fact, developers need to register themselves before launching or even advertising projects. Experts feel that this will certainly help in curbing manipulations and mis-selling that happens during project launches and advertising. This bill, which comes under the purview of the Ministry of Housing & Urban Poverty Alleviation, will be tabled in the Parliament during the upcoming monsoon session.

The HSBC Market Services Purchasing Managers Index (PMI) numbers for India in May 2013 are on the positive side. The data indicates an increase in new work orders in the private sector. According to industry players, the demand is strong and several new orders were also launched in the month. Robust business confidence meant that the Indian Services sector grew at its fastest rate for May 2013 as compared to that in the last four months. The Services PMI for May 2013 stood at 52 against 50.5 in April 2013. (A reading above 50 indicates an expansion while that below 50 indicates contraction.) The May numbers indicate the fastest pace of business activity since February 2013.

However, the rising Current Account Deficit (CAD) has raised concern at the government level. In its quest to lend some support to the INR and balancing the ever rising CAD, the Finance Ministry has hiked the gold import duty yet again on Wednesday (June 5, 2013) from 6% to 8%. Interestingly, this is the second time in the last 6 months that the duty on the yellow metal has been hiked. On the other hand, the rupee depreciated as against the dollar and touched a low of Rs 57 today.

Gold prices in India witnessed some buying as the precious metal gained by 2.76% in this week.

Money inflows from FIIs remained strong last week, as they bought equities worth Rs 840 crore. On a YTD basis, FIIs have pumped in Rs 82692 crore in the Indian equity markets. DIIs ended the week in the red, selling equities worth Rs 309 crore.

The markets are likely to remain subdued and may trade on a negative note in the next week. This will primarily be led by the impact of the depreciation of the INR. The non-farm pay roll data in the US expected today (June 7) is also likely to play an important role in steering the course of the markets.