Markets likely to get quiet start on the last trading day of the week

The Indian markets lost over half a percent in last session despite getting better than expected IIP data and the continuous decline in the food inflation numbers. The weak outlook of the IT bellwether Infosys weighed on the market sentiments and traders opted to book profit fearing more such weaker projection by the companies. Today, the markets are likely to get a cautious start, the global cues though remain optimistic and the movement of the European markets will give some direction to the markets. The rate sensitives that have been in jubilant mood due to the decline in food inflation may come under pressure, as the Reserve Bank of India’s Deputy Governor Subir Gokarn has said that food inflation is relevant in terms of the impact on inflationary expectations, but has no direct link to monetary policy.

There will be some jitters in the oil & gas sector as the government has formally asked the petroleum regulator to determine marketing margins for natural gas on the basis of costs. Until now, marketing margins were negotiated between buyers and sellers. While, Reliance charged $0.135 per unit marketing margin for supplying its KG-D6 gas, Gail was charging $0.17 per unit for supplying imported gas and gas supplied from the Panna-Mukta and Tapti fields.

Apart from this, there will be some result announcements to keep the markets buzzing. CMC, Sintex, Gujarat Auto and Triveni Turbine will be announcing their numbers today.

The US markets managed a green close despite some weak economic reports, there was cautiousness in the markets after the report that unemployment claims rose following the holiday season. The claims rose to the highest level in six weeks, mostly because companies let go of thousands of holiday hires. Also, the retail sales rose at the weakest pace in seven months in December. The Asian markets have mostly made a positive start on optimism of some resolution to the Europe’s debt crisis. The Chinese market is slightly in red as its money-market rate rose the most in more than a week on speculation cash demand will increase before the Lunar New Year holiday.

Back home, Indian frontline equity indices went through a lot of commotion on the penultimate trading session of the week and sank close to a percent, as the shockwaves spurred by Infosys’s dismal guidance for the fourth quarter outweighed the encouraging monthly IIP and weekly Inflation numbers. The frontline indices not only failed to extend the uptrend for third straight session but also could not protect the psychological 16,100 (Sensex) and 4,850 (Nifty) levels as ruthless position squaring in the information technology space dragged the tech-heavy index. Sentiments got spooked right from start of trade as bellwether Infosys came out with its third quarter earnings which were good in rupee terms thanks to around 11% correction in rupee since the second quarter but the stock got badly butchered by over 8% for its flat guidance for the fourth quarter in dollar terms. A ray of hope came with the announcement of pleasantly surprising November industrial output figures which showed IIP surpassed all estimates to stage a sharp rebound to 5.9% in November, a month after contracting to a revised 4.7%. But the upbeat IIP numbers could not succeed in propping up sentiments as investors were worried that the RBI may not resort to monetary easing after the strong IIP numbers in its upcoming policy review meet on January 24. Meanwhile, PMEAC Chairman C Rangarajan pointed out that RBI is likely to prefer open market operations (OMOs) over Cash reserve Ratio (CRR) cut. Moreover, the negative weekly food inflation data too failed to boosted investors’ morale in the session. Earlier on Dalal Street, the benchmark got off to a somber opening on the back of Infosys’ earnings announcement and pessimistic sentiments prevailing in Asian markets. The sluggish trade continued till the announcement of monthly IIP numbers, post which the key gauges showed some signs of recovery. But the optimism did not last for long as hefty position squaring in the IT space dragged them to intraday lows. In the BSE sectoral space, the IT and TECk counters remained the top laggards, as they got pounded by about 6% and 4.5% respectively. However, the Power index went home as the top performer and surged over 1% on the back of strong growth in IIP numbers. Finally, the BSE Sensex lost 138.35 points or 0.86% to settle at 16,037.51, while the S&P CNX Nifty declined by 29.70 points or 0.61% to close at 4,831.25.

The US markets closed higher on Thursday, with the S&P 500 extending its advances into a fourth day, as the Spanish and Italian auctions fueled optimism that Europe’s debt crisis was not worsening and overshadowed data on US jobless claims and retail sales that disappointed investors in early trade. The US retail sales rose less than thought in December and weekly jobless claims climbed more than anticipated. Jobless claims rose by 24,000 to a seasonally adjusted 399,000 in the week ended January 7, the US Labor Department stated, while retail sales rose 0.1% in December. The data may curb some enthusiasm for US growth resurgence, as there were three elements that helped drive optimism towards the end of the year - jobs, retail spending and housing.

European Central Bank President Mario Draghi stated that euro-zone debt markets remain at risk but some recent liquidity measures were helping. The ECB head spoke after the central bank held interest rates unchanged after two consecutive cuts, with recent illustrations of some economic strength in the region allowing the central bank to keep its benchmark rate at 1%. Also, a drop in borrowing costs at debt auctions in Europe fostered optimism, with Spain selling 10 billion euros, or $13 billion, in bonds, double the goal for the auction. Italy sold 12 billion euros of bills, offsetting worries it would face an uphill battle to finance its debt.

The Dow Jones Industrial Average closed higher by 21.57 points, or 0.17 percent, at 12,471.00. The S&P 500 was up by 3.02 points, or 0.23 percent, at 1,295.50, while the Nasdaq closed up 13.94 points, or 0.51 percent, at 2,724.70.

Crude oil prices, after trading with around a percent gain for most part of Thursday’s session, crumbled in the dying hours of trade and sank below the psychological $100 a barrel levels for the first time in 2012. The late sell-off was triggered by reports that the Europe will abstain from embargoing Iranian oil imports for at least next six months till the time Greece, Italy and Spain find alternative supply. Despite the depreciation in American currency, the oil prices settled with close to two percent cuts in the session on being pressured by downbeat US economic reports which showed unemployment claims were more than forecast while December retail sales were weaker than expectations.

Benchmark crude for February delivery plunged $1.77, or 1.8% to settle at $99.10 a barrel after trading as high as $102.98 a barrel on the New York Mercantile Exchange. In London, February Brent crude sank $0.98 or 0.9% to end at $111.26 a barrel after trading as high as $115.12 a barrel on the ICE.