RTTNews - Tuesday, the Indian market may open modestly higher on account of short covering after irrational exuberance in the run-up to the budget led to a steep fall in the previous session. That said, global cues are mixed and investors may adopt a wait and watch attitude before taking any fresh positions. Analysts believe that the process of adjustment will continue ahead of the upcoming earning season, which will be kicked off by bellwether Infosys on Friday. Industrial production report for May due on Friday and the possibility of a downgrade of the nation's rating by rating agencies may also keep underlying sentiment cautious.

Fund buying if any could be limited, as they await for some clear policy initiatives from the government. Foreign institutional investors sold shares worth Rs.1,483.03 crore on a net basis on Monday, provisional data released by the BSE showed.

On Wall Street, the major U.S. averages closed mixed on Monday after a sharp move to the downside in early trading. Traders shrugged off a report from the Institute for Supply Management which showed that activity in the service sector contracted for the ninth consecutive month in June, although at a slower pace than economists had been expecting. The Dow Jones Industrial Average closed up 0.5% and the S&P 500 index rose 0.3%, but the tech-heavy Nasdaq finished down 0.5%.

Crude oil fell sharply to its lowest levels in nearly two weeks in the New York Mercantile Exchange on Monday, weighed down by rising fuel inventories and concerns over the slow pace of global economic recovery following weak labor data from the U.S. Light sweet crude for August delivery lost $2.68 to close at $64.05 a barrel as trade resumed after a three-day holiday weekend in the United States. In Asian trading on Tuesday, crude oil was last trading firm at $64.27 a barrel.

The Indian rupee closed at a near two-week low of Rs.48.54/56 against the dollar, down 65 paise on Monday, spooked by fears of capital outflows and due to fresh demand for dollars from banks.

The Indian market slumped on Monday after the Union budget failed to live up to market expectations. Stocks were dumped across the board ignoring the positive aspects of the budget. After trading firm in early trading, the BSE Sensex plunged to a low of 13,959 before finishing at 14,043, down 870 points or 5.83% from its previous close, while the S&P CNX Nifty shed 259 points or 5.84% to 4,166, the broad-based BSE 500 index slumped 5.58%, the mid-cap index melted 5.17% and the small-cap index tumbled 4.50%. On the BSE, the market breadth was extremely negative, as decliners outnumbered advancers by 2015 to 556 with 62 stocks closing unchanged.

Meanwhile, many analysts, notable economists and industrialists said that the markets had misunderstood the budget and the market crash on Monday was an aberration than an indicator of the quality of the budget.

The budget had its focus on stimulating domestic demand with a clear focus on infrastructure building. A major rise in government spending for schemes such as National Rural Employment Guarantee Scheme (NREGS), Bharat Nirman, Rajiv Gandhi Grameen Vidyutikaran Yojana and Indira Awas Yojana, are expected to further stimulate demand in rural India for making the development process more inclusive.

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