Markets likely to start the new series on a cautious note

The Indian markets witnessed a choppy day of trade in last session and despite making good bounce back in latter half of the trade closed with loss of over a quarter percent. All the rate sensitives were brutally butchered. Today, the start of the new series is likely to be on a cautious note. There will be buzz in the fertilizer sector as the Empowered Group of Ministers (EGoM) on gas will have to take a call on several issues when it meets on Friday. Which includes, giving continued priority to fertiliser and power sectors in gas allocation, fixing the proportion of fuel supply to non-core sectors like steel, and deciding on the recommendations of Saumitra Chaudhuri committee report on pooling of gas prices. Traders will also be eyeing the international crude prices that have been surging high in the last couple of days on the Iran issue. Meanwhile, India has sought up to five million tonnes of additional crude from Saudi Arabia with a view to make up for lost supplies as the country is looking at paring its oil purchase from Iran in the face of US and EU sanctions against Teheran. Finance minister Pranab Mukherjee said on Thursday that the government will try to raise the economic growth rate to 7.5-8% in the next fiscal from about 7% currently, that may boost the investors morale and help in recovery in latter part of the trade.

The US markets made a bounce bank on Thursday after a labor market report indicated that the economy was slowly strengthening. New claims for unemployment insurance held at the lowest level since the early days of the 2007-2009 recession. On the same time data from another key sector of the economy also suggested improvement, US home prices rose 0.7 percent in December. The Asian markets have made a mixed start and some of them are marginally in red. There was some optimism with the good economic data in US and Europe.

Back home, the last two sessions of the February series futures and options contract expiry week turned out to be days of correction for the Indian stock markets which have seen the bulls losing their stronghold over the crucial 5,500 (Nifty) and 18,100 (Sensex) levels. The F&O expiry day turned out to be yet another disappointing session for the benchmark indices which went through extremely volatile trades to eventually snap the session with around half a percent cuts on extremely large volumes. The drift in markets in last two sessions has forced market participants to give a rethink to their strategy on domestic markets especially at a time when international crude oil prices have spiraled to unsustainable levels and are showing little signs of correcting any time soon. Nevertheless, the frontline indices managed to extend the gaining momentum after the January series over 10% rally and amassed another around six percent gains in February series. Meanwhile the recent sharp spurt in international crude oil prices has set alarm bells ringing, stoking nervousness not only among market participants but also the policy makers. The rally in oil prices would certainly have spiraling effect on the Indian economy as the nation imports more than 70% of the commodity for domestic requirements, thus re-fuelling the inflationary concerns. On the BSE sectoral front, the high beta Realty counter led the losers in the space with 2.5% losses. The Metal, Auto and Capital Goods counters too went home with losses. On the flipside defensive - FMCG pocket along with the Power and Oil & Gas counters settled on a positive note. On the F&O front, February series Nifty and Sensex staged a strong feat by jumping around 6% each. Besides, the broader markets managed to outperform their larger peers by a fat margin as by the end of February series the mid cap and small cap rallied around 8.6% and 7.6% respectively. The rate sensitive counters like Realty, Bankex and Auto remained among prominent gainers in the series as they ended with handsome gains of about 13.5%, 8.7% and 10.8% respectively. Finally, the BSE Sensex lost 66.75 points or 0.37% to settle at 18,078.50, while the S&P CNX Nifty declined by 22.05 points or 0.40% to close at 5,483.30.

The US markets closed higher on Thursday, as reports underlining general improvement in the economy offset a disappointing outlook from Hewlett-Packard Company, lifting the major indexes into positive terrain for the week. Hewlett-Packard Company fell the most after it projected second-quarter profit short of Wall Street’s average estimate. The Thursday’s economic data had the Federal Housing Finance Agency reporting that US home prices climbed 0.7% in the final month of 2011. And, the government offered further evidence of an improving labor market, as applications for jobless claims last week held at a near four-year low. Initial jobless claims were unchanged in the week ended February 18th, according to a report released by the US Labor Department. The report showed that jobless claims came in at 351,000, unchanged from the previous week's revised figure of 351,000, the lowest level since March of 2008.

The European Commission stated that the euro area is likely to see a mild recession this year. The Commission estimates real GDP in 2012 to contract 0.3% in the euro area and stated the inflation forecast for 2012 has been revised slightly upwards compared with the autumn, due to persistently high energy prices and increases in indirect taxes. It now stands at 2.3% in the EU and 2.1% in the euro area. However, German business sentiment improved more than estimated in February, according to the Munich-based Ifo institute.

The Dow Jones Industrial Average closed higher by 46.02 points, or 0.36 percent, at 12,984.70. The S&P 500 gained 5.80 points, or 0.43 percent, at 1,363.46, while the Nasdaq was up by 23.81 points, or 0.81 percent, at 2,956.98.

Crude oil prices sustained the winning momentum for yet another session on Thursday, making it a six straight session gaining streak, as investors overlooked the data showing rising oil inventories and focused on the better than expected US jobless claims and German business confidence reports which spurred optimism. The Brent crude prices, on the other hand, touched the highest levels in nine months on lingering supply side worries as tensions between the West and Iran showed little signs of waning while the depreciation in US dollar too buttressed the fuel prices.

Benchmark crude for April delivery surged $1.55 or 1.5% to settle at $107.83 a barrel on the New York Mercantile Exchange. In London, April delivery Brent crude climbed $0.72 or 0.6% to close at $123.62 a barrel.