Markets likely to get a cautious start on sluggish global cues

The Indian markets consolidated on Wednesday after a big rally, buying was witnessed in selective counters otherwise traders opted to book some profit of the table. Today, the start is likely to be cautious as the global cues too have turned sluggish on European concern and the trade may remain rangebound. The markets will take direction in the late trade with the opening of European indices. Marketmen may get some support with India's chief economic adviser, Kaushik Basu’s belief that the tide has turned in a long battle against inflation and the economy is set to rebound to its “full-steam” growth rate of around 9 percent within two years. Basu said that economic growth has faltered in fiscal 2011/12 and will end the year on March 31 at around 7.5 percent, far lower than the 9 percent forecast in last year's budget, which has since been pilloried for being so optimistic. Meanwhile, Credit Suisse has upgraded the domestic equity markets from underweight to neutral as valuation has come down to attractive levels. Traders will also be eyeing the movement in rupee that surged in last session. Also, Capital markets regulator Sebi has said that it was informally talking to other regulators to adopt its model of uniform know-your-customer (KYC) platform. . Apart from this there will be many stock specific actions to keep the markets buzzing. ONGC has notified four more discoveries totalling 15 in the Fiscal year, while cash strapped airlines Kingfisher is considering about 2000 job cuts and longer working hours for its staff.

The US markets made a flat closing on Wednesday, a day after witnessing a big rally. European worries once again plagued the markets as the commercial banks in the region held record overnight deposits with the ECB showed the unwillingness to lend each other. However, on the domestic front the economic news once again remained better and the factory orders for the month of November rose by 1.8% from a decline of 0.2% in October. The Asian markets have made a mixed start and some of the indices are trading with marginal losses on sign of worsening European crisis after Italy’s biggest bank said it needs to raise more capital.

Back home, after showcasing an awe-inspiring performance in the last session, Indian frontline equity indices slipped into consolidation mode in Wednesday’s session and registered their first negative close of the year 2012. Benchmark indices failed to extend the two session gaining momentum, as investors lacked conviction to take larger bets a session after witnessing a vivacious close to three percent rally on Tuesday. The psychological 4,780 (Nifty) and 16,900 (Sensex) levels have once again proved as though nuts to crack for the frontline indices as they failed to sail beyond those levels or the second time in last eight trading sessions. Marketmen took to hefty selling pressure after the key indices touched intraday high levels in the second half which dragged the indices to the lowest levels in the session as investors continued to square off positions from the rate sensitive Automobile and Technology counters. Meanwhile reports that India’s resilient service sector expanded in December at sharpest pace since July on the back of strong new business and output growth went largely unnoticed by market participants. Earlier on Dalal Street, the benchmark got off to a flat start as the indices showed signs of consolidation in early moments of trade, a session after the sharp rally. The bourses kept oscillating in a narrow range around the neutral line through the first half but the key gauges showed a sharp uptick in the second half of trade tracking the European bourses. However, the optimism was extremely short lived as investors took the opportunity to take profits off the table and dragged the key gauges to the lowest point of the session in no time. Thereafter, there appeared mild short covering which helped the bourses to pare the losses by the end. On the BSE sectoral space, the PSU index remained the top gainer in the space with over one and half a percent gains followed by the Capital Goods and rate sensitive Bankex indices which ended with notable gains. On the other hand, the rate sensitive Auto index plummeted over a percent followed by the Technology counter that slipped by around a percent. Finally, the BSE Sensex lost 56.72 points or 0.36% to settle at 15,882.64, while the S&P CNX Nifty declined by 15.65 points or 0.33% to close at 4,749.65.

The US markets closed on a mixed note on Wednesday, as European worries weighed on good economic reports.In late trade improved sales at retailers and carmakers helped bolster confidence in the economy which helped assuage concern about Europe’s debt troubles. US retailers’ December sales likely ended on a solid note after last-minute holiday shopping and stepped-up promotions helped salvage a sales lull in the first half of the month. The International Council of Shopping Centers trade group raised its December sales forecast by 0.5 percentage points to a gain in the range of 4% to 4.5% after sales in the week ending Dec. 31 rose 5.3% - their fastest pace since the week ending July 11, 2010. Also, Automobile makers had one of their best Decembers in years as strong sales growth helped fuel a big turnaround for much of the industry. The US government reported that US factory orders rose 1.8% in November.

Moreover, there are more important economic reports coming in the next two days which investors are optimistic, with Automatic Data Processing to release its employment report on Thursday, just ahead of weekly jobless claims data from the US government. On Friday, the nonfarm payrolls report for December is due. Besides in Europe, Spanish Prime Minister Mariano Rajoy’s government may apply for loans from the European Union’s rescue fund and the International Monetary Fund to help restructure the country’s financial industry.

The Dow Jones industrial average gained 21.04 points, or 0.17 percent, to 12,418.40. The Standard and Poor’s 500 closed higher by 0.24 points, or 0.02 percent, to 1,277.30, while the Nasdaq composite lost 0.36 points, or 0.01 percent, to 2,648.36.

Crude oil prices snapped a choppy session on a flat note with a positive bias on Wednesday as investors remained on the sidelines, a day ahead of Energy Information Administration’s weekly inventories data. The downside in the oil prices was capped amid reports that the European Union reached an agreement to embargo imports of crude oil from Iran, though it is yet undecided that when such a ban will take place. But the upside for the fuel prices also was limited by the appreciation in US dollar against a basket of currencies which made the commodity more expensive for overseas investors.

Benchmark crude for February delivery added $0.26, or 0.3% to settle at $103.22 a barrel on the New York Mercantile Exchange. In London, ICE February Brent crude surged $1.57, or 1.5%, at $113.70 a barrel after trading as high as $113.97 a barrel.