Markets to make a cautious start on penultimate session of F&O expiry

The Indian markets in a volatile last session of trade managed flat but positive close. Today, the start of the penultimate day of F&O series expiry is likely to be cautious and the decline that it escaped due to Republic Day holiday, what other regional markets went through, is likely to be seen in early deals, however volatility can be seen through the day based on result reactions. Traders will also be concerned with the SBI Composite Index falling below the 50 mark to 47.3 in January. Manufacturing activity in the country dipped to a one-year low, suggesting moderation in growth. Also, the World Bank has warned that slowing emerging-market economies were hampering an oil recovery, and prices could sink further in a blow to a “fragile” global economy. However, there will be some support with Standard & Poor's Rating Services stating that Indian economy is less vulnerable to external shocks as it is mainly driven by household consumption and government spending, and not dependent on hot money which can move out quickly. There will be some buzz in power sector stocks on report that Coal India's supply to the power sector increased by 6.8 percent to 299.10 million tonnes in the first 9 months of the current fiscal.

The US markets ended up in last session, the pullback after previous session’s big losses took the markets considerably higher in reaction to a significant rebound by the price of crude oil and on some good earnings report. The Asian markets are mostly in green, erasing Tuesday’s drop. The Japanese market has taken the lead, surging by over two percent, on the other hand the Chinese market slid after a report showed industrial profits dropped last month. 

Back home, extending their winning streak for second day in a row, Indian equity benchmarks ended the session with a gain of around two tens a percent on Monday. Sentiments got some support with United Nations world economy report, which indicates that India will be the world's fastest growing large economy at 7.3 percent in 2016, improving further to 7.5 percent in the following year. Some support also came with the report that India's index of industrial production (IIP) is likely to grow 4-5 per cent in December 2015. The government's efforts to de-bottleneck investment coupled with early signs of pick-up in urban demand would support production. However, gains remained capped by profit bookings and caution over the upcoming rate setting meeting of the FOMC (Federal Open Market Committee) scheduled for January 27-28. FOMC assumes significance as higher interest rates in the US are expected to lead away FPIs (Foreign Portfolio Investors) from emerging markets such as India. Investors also remained cautious with global rating agency Moody's statement that that India's economic exposure to external risks has gone up during the past seven months. Market participants are increasingly concerned about the potential spillover on India's growth story of external risks such as interest rate tightening in the US and China's ongoing slowdown. Meanwhile, volatility ahead of expiry of January derivative contracts has also kept investors on the sidelines. On the global front, Asian stocks rallied again Monday as investors bet on central bank stimulus measures to support markets after the bloodbath at the start of the year, however, European markets traded with mild losses in early deals. Back home, the benchmarks got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. But the optimism soon started showing signs of easing in late hours of trade and profit booking in few sectors and drifting European markets weighed down the local bourses by the end of session. However, hefty short covering in the late hours helped the indices to end the session on positive note. Finally, the BSE Sensex gained 50.29 points or 0.21% to 24485.95, while the CNX Nifty ended up by 13.70 points or 0.18% to 7,436.15.