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Market Recap

The benchmark Indian equity indices managed to recover smartly from an afternoon tumble that was triggered by S&P's move to cut outlook on India;s ratings to 'negative' from 'stable'. The ratings agency also downgraded the outlook on three major IT companies besides seven public sector companies. But, the market pulled back from intraday lows amid speculation that a downgrade of India's rating from investment grade may not happen. Comments from the Finance Minister and Moody's reaffirming its outlook on India also partly helped in the recovery.

The negative outlook signals at least a one-in-three likelihood of the downgrade of India's sovereign ratings within the next 24 months. A downgrade is likely if the country's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," S&P said.

At the same time, Moody's Investors Service said it has reiterated the 'Baa3' credit rating for India effective since 2004. "India's average GDP growth rate has outperformed similarly rated peers in the last decade, and we expect India's relatively strong savings and investment rates to sustain future growth," Moody's said in its update on April 20.

Volatility is likely to be high ahead of Thursday's F&O expiry. Weakness in the rupee is adding to the jitters. The Indian currency is close to breaking 53 per dollar mark. The earlier support of 5230 on the Nifty has been acting as a strong resistance. The outlook remains cautious as long as Nifty trades below 5250.

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