Monsoons, results to set mkt course: HSBC, Angel Broking

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It's a disappointing Monday on Dalal Street with indices languishing in negative terrain right from the word go. The markets did stage a late recovery which helped markets end off lows. The Nifty closed 30 points lower, failing to hold on to 4,000 at 3,974, while the Sensex lost 104 points and closed at 13,400.

Consumer durables, metals, and realty stocks led the fall, while tech stocks outperformed. Turnover was dismal at around Rs 67,000 crore while the breadth too disappointed at 1:5.

Also see: Mkts end lower; metals dip, broader indices underperform

On the outlook for markets:

Jitendra Sriram, Vice-President and Fund Manager - Equities, HSBC, said the correction in markets has been fairly healthy. "With about 10-15% correction since the budget, I think a lot of froth has given way. Globally, the way Europe and Asia have opened up and traded over the course of today is clearly a big negative. Ever since June 10, US markets have also peaked out and after that it has been a slow grinding fall down. The near-term question for India is very much going to be monsoon-led and monsoon-related plus of course the corporate results which are coming through over the course of this month. As we go over the quarter, the market will clearly take cues from the results which come out."

Rajen Shah, Chief Investment Officer, Angel Broking, feels investors should see how the monsoons progress and then take a call on markets. "Everybody was expecting big bang reforms and aggressive announcements by the finance minister in the budget but unfortunately nothing of that happened. We are getting indications by the interviews which have been given by the finance minister that a lot of things are going to happen outside the budget over the next 6-9 months. That has affected the sentiment. Monsoon reports have been significantly below normal, which is impacting fresh commitments. I think strategy should be to wait for the next two weeks, see how the monsoon progresses, and only then take a call on the markets."

Deepak Mohoni of trendwatchindia.com said there is nothing to indicate that the market downtrend is ending anytime soon. "It is too early to tell because this move up from today's low is barely two hours old. We are talking of a decline which has gone on for 8-10 sessions. The intermediate trend is still down. The global markets are still in a downtrend. So, nothing really has happened apart from this last one hour's rally to suggest that this downtrend is ending anytime very soon."

On monsoons:

HSBC's Jitendra Sriram feels the key thing for the market to look at over the course of the next fortnight to three weeks will be the monsoons. "The kind of data that has come out of monsoon being deficient or running behind by about 35-40% across various parts of the country is worrisome. The worst would be somewhere in the northwest provinces of the country where you have a lot of paddy plantations and stuff which typically requires standing water. If monsoons were not adequate, it might even require re-sowing of crops. I would be fairly worried if monsoons don't pick up in the next two-three weeks as it has a ripple impact in terms of various consumption items and so on. In case, there is deficient rainfall or a kind of drought then the market will give away some more. Other than the monsoons, I think we are probably at a fairly reasonable valuation."

Shah is hopeful the monsoons will pick up as the season progresses. "In UP, the monsoon is down 50% below normal. So, it is really very saddening and very shocking. It could have a significant impact on the markets actually. Maybe if the monsoons turn out to be 30-35% below normal, we have a long way to go down actually. But we are hopeful that monsoons will pick up and that is what the forecast has been. So, let's keep our fingers crossed."