Markets likely to get a soft-to-cautious start on F&O expiry day

The Indian markets witnessed sharp correction in last session after a series of good show; traders opted to book profit on concerns of global economic recovery. The rate sensitives’ were the main culprit, dragging the markets lower by over one and half a percent. Today is the expiry of February F&O series and more volatility is expected, the start is likely to be soft but some recovery too can be expected in first part of the trade. Markets are likely to be jittered with one of the Deputy Governors of RBI stating that the apex bank does not expect the economic growth to have a spectacular turnaround next fiscal. He also pointed out that the country’s current account deficit has to be brought down, and "we have to find ways to use gold more efficiently". Meanwhile in a positive development, Finance Minister Pranab Mukherjee has said that India will soon roll out an IT platform to integrate central and state indirect taxes regime. An IT network called GSTN is being created to ensure integration of the tax systems of the centre and the states. There will be lots of scrip specific actions to keep the markets buzzing, South Africa-based Econet Wireless is seeking at least $3.1 billion in damages from Bharti Airtel in a dispute over ownership of Airtel Nigeria, while Kingfisher and other cash-strapped airlines will now be allowed to import fuel directly on actual user basis against licences issued by DGFT. All licenses will come with a validity period and will become invalid if an airline is not able to import within the prescribed period.

The US markets closed lower on Wednesday, the investors got worried with the weak data on European business activity that raised concerns about a recession in the euro zone. Banking stocks dragged the markets due to their exposure to Europe, while on the domestic front sales of previously owned houses missed expectations. Most of the Asian indices have made a soft start on concerns of slowing global economic growth. Taiwan Weighted was trading lower after the country cut its 2012 growth forecast yesterday. Hang Seng was in somber mood as Hong Kong is expected to report sharp decline in exports in January.

Back home, after the recent sharp rally in Indian stock markets, some sense of weakness finally got trickled in as investors showed genuine signs of profit booking a day ahead of February series futures and options contract expiry. The frontline indices failed to extend the gaining momentum and halted the two session gaining streak after getting butchered by close to a percentage points on extremely large volumes. Sanguine sentiments led to initial upmove in local markets despite weakness across Asia but the psychological 5,600 (Nifty) and 18,400 (Sensex) levels proved as stern resistance levels for the markets to hold. The frontline indices could not hold on to those levels for long and witnessed abrupt selling pressure in mid noon trades as investors chose to take hefty profits off the table after the recent sharp upmove in domestic markets which have skyrocketed over 18 percent in 2012, thanks to hefty buying from foreign funds who pumped in over $4.4 billion so far this year. The heavy pounding for the local markets came on a day when Prime Minister's Economic Advisory Council affirmed that Indian economy is expected to grow at 7.1% in FY12, marginally higher than the 6.9% projected by CSO advance estimates, as slight improvement in growth numbers is expected to come from the agriculture and construction sectors. The PMEAC has projected growth to be around 7.5-8% in FY’13 if the global environment turns favorable. The high beta Realty pocket, which skyrocketed in the recent past, got slaughtered in the session by close to seven percent after heavyweights like DLF and HDIL nosedived. The Metal and Banking pockets too were not spared either as they went home with nasty cuts of around four percent. However, information technology counter shrugged the pessimism prevailing across the sectoral space and climbed by around half a percent, thanks to the gains in bellwethers like TCS and Infosys. Earlier on the Dalal Street, the benchmark got off to a positive opening as investors shrugged pessimistic sentiments prevailing in Asian markets. However, the frontline indices failed to take advantage of the initial optimism and slipped below the neutral line. After trading in close proximity with the previous closing levels for most part of the session, sudden bouts of profit booking emerged in mid noon trades. The bourses got dragged to the lowest point in the session in late trade and failed to show any kind of recovery till the end. Finally, the BSE Sensex shaved off 283.36 points or 1.54% to settle at 18,145.25, while the S&P CNX Nifty plunged by 101.80 points or 1.82% to close at 5,505.35.

The US markets closed lower on Wednesday, weaker-than-estimated economic data from China and Europe and domestic home sales in January that, even though rose at the fastest pace since May 2010 but remained lower than anticipated. The National Association of Realtors reported existing-home sales rose 4.3% in January to a seasonally adjusted annual rate of 4.57 million. Meanwhile, the President Barack Obama’s administration took aim at so-called corporate tax havens in a broad proposed overhaul that would lower the tax rate for companies and encourage job creation in the United States. Treasury Secretary Timothy Geithner expressed disdain for the current business tax system, calling it uncompetitive, unfair and inefficient and stating that it’s riddled with special favors. The Obama administration proposed cutting the US corporate rate to 28% from 35% while eliminating dozens of tax breaks. Also, the newly formed Consumer Financial Protection Bureau began an inquiry into overdraft fees, a multibillion-dollar business for US financial institutions. The Dow Jones Industrial Average closed lower by 27.02 points, or 0.21 percent, at 12,938.70. The S&P 500 lost 4.55 points, or 0.33 percent, at 1,357.66, while the Nasdaq was down by 15.40 points, or 0.52 percent, at 2,933.17.

Crude oil prices managed to negotiate a close in the positive territory, though with marginal gains but extended the gaining streak for the fifth successive session on Wednesday. The lingering supply side concerns after Iran - a nation with nuclear ambitions refused International Atomic Energy Agency inspectors permission to an Iranian military base prevented the downside in oil prices. The upside in dollar denominated oil prices was limited by the appreciation in American greenback against a basket of currencies after qualms over Greece's ability to carry out tough reform measures resurfaced. Benchmark crude for April delivery rose $0.03 or 0.03% to settle at $106.28 a barrel after trading as high as $106.72 and as low as $105.61 a barrel on the New York Mercantile Exchange. In London, April delivery Brent crude surged $1.24 or 1.02% to close at $122.90 a barrel.