Markets to make a cautious start, likely to see some recovery in latter trade

The Indian markets plunged in last session with major averages losing over two percent and slipping below the crucial psychological levels. Today, the start is likely to remain somber on weak global cues, though some recovery can be seen in the very early trade, as the government has accepted the recommendations of A P Shah-led panel that minimum alternate tax (MAT) is not applicable to foreign institutional investors (FIIs), a move which is expected to boost investor confidence and help sentiment in the financial markets. The committee has recommended that Section 115JB of the Income Tax Act may be amended to clarify the inapplicability of MAT provisions to FIIs/FPIs. Banking stocks will keep buzzing, as the RBI has issued draft guidelines for its proposed plan to change the method by which banks calculate their lending rates in order to make them more responsive to the Central bank's monetary policy actions. The realty stocks may remain under pressure as a Moody’s Investors Service in its latest report has said that poor sales and high costs will continue to strangle cash flows of large realty firms over the next year. The Auto stocks will too keep buzzing, reacting to their monthly sales numbers.

The US markets tumbled again in last session, further offsetting the recovery rally seen last week. There were some concerns about the global economy following the release of some disappointing Chinese economic data along with some weak domestic economic data that weighed on the sentiments. The Asian markets have made mostly a lower start with Chinese market slumping again on concern that global economic growth is slowing after Australia’s economy grew at half the pace estimated.

Back home, Tuesday's trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 7,800 (Nifty) and 25,700 (Sensex) levels, owing to heavy sell-off in global markets. Markets never got a breather after getting a sharp gap down opening and whenever there was any sign of stabilization, it was followed by more intensified selling, and finally the trading hours closing came to rescue to the plunging markets. Sentiments remained dampened since beginning on reports that the country’s growth rate declined to 7 percent in the April-June quarter, from 7.5 percent in the previous quarter, amid deceleration in farm, services and manufacturing sectors. Traders also remained worried after the manufacturing sector grew at a slower pace in August as order flow turned sluggish. Sentiments also weighed down after index of eight core industries slowing to three months low at 1.1 per cent in July compared to 3 per cent in the previous month, implying that July IIP will come lower than the June figures, as the eight core industries comprise a weightage of nearly 38 per cent in the IIP. Some concern also came with the India Meteorological Department’s report that monsoon has been deficient by 11 percent so far with August recording 22 percent less than normal rainfall, raising the prospect of lower foodgrains production for the Kharif season than 2014 if the situation does not improve in September. Selling got intensified after European markets made an awful start, while Asian markets too ended in red terrain. Back home, bulls never came into picture and bears were in absolute command of the markets from the start, mirroring the global rout. All across there was red on the street, with major bourses continuously losing their various support levels, while the bluechips dragged the benchmarks. Sentiments also remained dampened on report that foreign investors pulled out a record $2.55 billion from Indian markets in August, the highest-ever monthly outflow at least since 2002 as per regulatory data. Finally, the BSE Sensex plunged by 586.65 points or 2.23% to 25696.44, while the CNX Nifty declined by 185.45 points or 2.33% to 7785.85.