Markets to get a weak start on sluggish global cues

The Indian markets suffered sharp laceration of over one and half a percent in last session, lacking any supportive cues. The investors remained apprehensive about the results of the five state elections. Today, the mood is likely to remain somber and the election results will start trickling out along with the market opening and anything unexpected will further mar the momentum of the markets. Textile industry stocks will keep buzzing with the surprising decision of commerce ministry to ban cotton exports. The ministry argued that the decision was taken in view of exports in current marketing year (October-September) exceeding the surplus by 10 lakh bales. Exportable surplus for year was pegged at 84 lakh bales. Meanwhile, the caution is likely to continue in the markets even though one of the Deputy Governor’s of the RBI has said that the apex bank remains focused on economic growth even though rising oil prices have emerged as an inflationary risk. Oil prices climbed to near $124 per barrel, compared with about $110 per barrel just before the bank's January policy statement when it said that its bias in the growth-inflation balance had shifted to growth.

The US markets ended lower on Monday mainly led by the Chinese forecast of slower growth; however the domestic economic data on factory orders and non-manufacturing activity came in better-than expected. The Asian markets have made a weak start and most of the indices are trading lower by half to one and half a percent in early trade. Metals stock in the region slid after Chinese Premier Wen Jiabao slashed the growth target to an eight-year low of 7.5% for the world’s second-largest economy, citing high inflation and a tepid worldwide economic outlook.

Back home, Monday’s session turned out to be a day of rigorous pounding for Indian stock markets which seldom showed instances of gaining any impetus as political uncertainty looming over the fate of Congress - ruling government at the centre coupled with gloomy global tidings prompted market participants to shun riskier asset classes like equities. The benchmark equity indices suffered a nasty one and half a percent laceration and drifted even below the psychological 17,400 (Sensex) and 5,300 (Nifty) levels, lacking any significant upside triggers. Nervous investors took profits off the table a day ahead of results of crucial assembly elections in Uttar Pradesh (UP) and four other states. Market participants feared that Congress’ poor showing in UP elections may not prove fruitful for the government at the centre as it may fail to revive stalled reforms. Hefty position squaring was evident in the high beta Realty and Metal sectors languished at the bottom of BSE sectoral space after being battered by over 3% each, while the rate sensitive Banking and Capital pockets too got thrashed by around 2.5% in the session. Amid the brutal across the board selling pressure only the defensive FMCG index managed to stand tall and settled with gains of a quarter percent, thanks to the over 1% gains in bellwether ITC. Besides, cement sector stocks failed to gain strength despite reports that cement prices are expected to rise by 6.4% in FY’12 after falling in the last fiscal and are also likely to increase by 3.8% in FY’13. Meanwhile, sentiments also were undermined after a HSBC survey indicated that India's services sector activity expanded at a slower pace in February while the Composite Index which covers both the manufacturing and service sectors slowed too. On the global front, disappointing cues from over the weekend US markets led to initial sell-off in Asian markets while reports that Chinese Premier has cut the world’s second largest economy’s growth target, too dented investors’ morale in the region. Investors remained in a limbo after getting contrasting picture of China’s service sector activity as official reports from the government showed the sector contracted while a private survey showed China's services sector expanded at its fastest clip in four months in February. European markets too plunged after reports indicated that European services sector unexpectedly contracted. Finally, the BSE Sensex shaved off 274.12 points or 1.55% to settle at 17,362.87, while the S&P CNX Nifty plunged by 79.05 points or 1.47% to close at 5,280.35.