Markets likely to get a soft-to-cautious start

The Indian markets extended their fall on Friday and indices lost their psychological levels of 18000 (Sensex) and 5500 (Nifty). Today, the mood is likely to remain cautious and the indices may consolidate further. There will be reaction in the markets related to Sterlite-Sesa Goa deal. The latter will absorb Sterlite Industries India in an all-share deal. Investors will get three Sesa Goa shares for five shares of Sterlite. Vedanta will transfer its 38.8% holding in Cairn India, including a debt of $5.9 billion, to the combined entity Sesa Sterlite. Meanwhile, there will be some buzz in the PSU stocks as well, as the government is likely to revert to the policy of using 25% of the disinvestment proceeds for reviving sick public sector units (PSUs) and recapitalising the profitable ones from the next fiscal year. Also, there will be some movement in oil & gas companies as the prime minister's principal secretary Pulok Chatterji has called a meeting this week to assess slackness and delay in oil & gas exploration activity.

The US markets made a flat closing on Friday despite good report of consumer confidence and retail sales; however the new home sales declined in the month of January and weighed down on sentiments of the investors. The Asian markets have once again made a mixed start with some of the indices trading lower by half to over one percent in early trade. The continuous rise in the international crude prices has become the major concern for the markets in the region. Also there was some anxiety regarding Europe as German lawmakers vote on a second Greek rescue package today and European Union heads of government hold a summit March 1-2 in Brussels.

Back home, the glumness of February series F&O contract expiry session got spilled over into the first day of a fresh futures and options series as Indian stock markets plunged by around a percent on Friday and completed a hat-trick of negative closes. The sell-off in local markets appeared even more discouraging because the fall came on a day when markets across the global largely exhibited positive trends. The frontline indices after the positive opening failed to capitalize on the momentum and slipped below the psychological 5,450 (Nifty) and 18,000 (Sensex) levels. However, the key gauges found support around the crucial 5,400 (Nifty) and 17,900 (Sensex) marks and spent the whole session consolidating their positions around those levels. Stocks from the rate sensitive Banking and Realty sectors continued to bear the brunt of hefty selling pressure while the Capital Goods and Oil & Gas pockets too suffered severe pounding. However, Metal sector stocks bucked the pessimistic trend and gained some traction after stocks like Sterlite and Sesa Goa rebounded a session after nose-diving on reports of a possible merger of the two companies as part of a group restructuring exercise. While stocks from the Information Technology counters too climbed over half a percent, helping the markets in trimming losses. Meanwhile, in view of a sharp drop in output from RIL's eastern offshore KG-D6 block, an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is scheduled to meet later in the day to consider changes in the natural gas allocation policy. Besides, private power producers have raised concerns over the Government’s proposed move to make it compulsory to source equipment from indigenous manufacturers by companies setting up ultra mega power projects in the country. The broader markets which showed some resilience early in the day finally settled with over half a percent loss but outperformed their larger peers after two straight sessions of underperformance. Finally, the BSE Sensex lost 154.93 points or 0.86% to settle at 17,923.57, while the S&P CNX Nifty declined by 54.00 points or 0.98% to close at 5,429.30.