Markets likely to get a soft start tailing global peers

The Indian markets, despite a smart recovery in mid of the trade could not capitalize on it and suffered sharp laceration of another one percent in last session. The election results weighed on the sentiments and the bad performance of the ruling Congress party led the markets lower, investors were worried that major reforms may not be taken forward. Today, the mood is not looking better under weak global cues and the markets may start again in red and Nifty might trade below 5200 mark in early trade. Though there will be some cheers among the UP based sugar companies, expecting fresh sops on Samajwadi party’s old pro-industry investment policy. Meanwhile, the commodities stock may react to the railways decision to increase freight rates by up to 20% for several commodities. The move is expected to increase prices of an array of goods, ranging from coal to fertilizers. The cautiousness in the markets is also likely to persist as ratings firm Standard and Poor's has warned that it could lower India's ratings if it continues with fiscal excesses or if it does not adopt policies to boost growth. Traders will also be eyeing the movement of rupee which has once again breached the 50 mark.

The US markets suffered sharp plunge on Tuesday with indices witnessing their biggest one-day drop in nearly three months. Though, there was not much on the domestic front fears about slowing global growth hit stocks after European Union’s statistics office confirmed that Europe's economy shrank in the fourth quarter. The Asian markets have made a weak start and most of the indices are down by about half a percent on report of contraction in European economy and eyeing the developments in Greece.

Back home, The hammering on Indian stock markets got extended for yet another session on Tuesday as the benchmarks equity indices capitulated by the end of trade after the initial sharp rebound. The session turned out to be extremely volatile one and the markets got pounded on particularly large volumes. The psychological 5,400 (Nifty) and 17,700 (Sensex) levels proved as difficult nuts to crack for the frontline indices which drifted lower in late morning trades amid the looming political uncertainty. Market participants grew increasingly worried as the ideal outcome of a Samajwadi Party (SP) - Congress alliance in Uttar Pradesh assembly elections fell apart since the SP emerged as the single largest party in the state with a clear majority. Investors took profits off the table since Congress’ poor showing in UP elections may not prove fruitful for the government at the centre as it may fail to revive stalled reforms. The local markets which at one point in time were comprehensively outperforming all the global peers, drifted lower by the end as apart from the political shambles, concerns over the deteriorating global economic situation and also over Chinese Premier Wen Jiabao’s lowering of the world's second largest economy's growth target, dented investors' morale. Investors globally remained in a pessimistic mood amid lingering concerns over debt crisis in Europe, while the weaker than expected economic reports like the shrinking euro-area services output and declining US factory orders too played spoilsport. Back home, the weakening in Indian rupee which depreciated to above Rs 50 per dollar along with the spike up in government bond yields, too undermined sentiments. On the BSE sectoral space, the Metal index bore the maximum brunt of selling pressure as it got thrashed by close to 4% followed by the Power and Capital Goods counters which plunged around 2%. On the flipside, investors showed some buying interests in defensive - FMCG counter while the Consumer Durables and IT indices too gained some ground. On the global front, barring the benchmarks in Malaysia, all equity indices in the Asian region settled on a pessimistic note with significant losses. The markets in Europe drifted to the lowest levels in a week as amid rumors that Greek debt restructuring was unlikely until next week. Finally, the BSE Sensex shaved off 189.58 points or 1.09% to settle at 17,173.29, while the S&P CNX Nifty plunged by 57.95 points or 1.10% to close at 5,222.40.