Markets likely to start on a cautious note, volatility to creep in F&O expiry week

The Indian markets despite a volatile trade closed with gains of around a percent in last session, there was some last hour buying that helped the markets to add gains. Today, the start is likely to be cautious and volatility is likely to creep in later trade, as it is the expiry week of F&O march series, it had been a long a and heavy series and traders are expected to carry forward their short positions to April. Traders will be eyeing the movement in rupee which is now at the lowest level of more than two weeks and its further decline could prompt foreign investors to pull out their money from the markets. On the same time the international crude prices will be closely watched, though there is a probable price hike in petroleum products but worries remain about the government's ability to contain its wobbly finances. Recently in the Union budget, the finance minister has slashed petroleum subsidies. The cut in subsidies had fuelled speculation that the government might be prepared to allow oil refiners to raise petrol prices again and could finally bite the bullet to deregulate diesel prices.

On the positive side the India Inc might breathe some relief as Pranab Mukherjee has said that income tax (I-T) officials would not be allowed to act as policemen. The assurance came amid apprehensions that tax commissioners would have powers to arrest industrialists or company officials under new provisions of the General Anti-Avoidance Rule (GAAR) after retrospective amendments to the Income Tax Act. He said that 'I can assure the industry that there is no intention of opening plethora of the old cases on this plea or that plea because that is simply not permissible (under the laws).'

The US markets eked out some gains on Friday on report that the housing market was not slipping further, though not improving with the pace expected either. The Asian markets have made a mixed start with some indices trading in red while some others have gathered gains of quarter to half a percent.

Back home, the last trading session, ahead of the March series futures and options expiry week, turned out to be a volatile one for the Indian stock markets but late recovery ensured that the frontline equity indices add around a percent before the close. Smarting with huge losses after the brutal over two percent laceration that the frontline indices suffered on Thursday, market participants remained cautiously optimistic in early trading hours of the week’s last session as they indulged only in stock specific activity, lacking any significant triggers to open fresh positions.  The main equity indices got strong support around the psychological 5,250 (Nifty) and 17,250 (Sensex) levels as they went on to rally over one and half a percent from those levels. In the morning hours of trade, markets lacked fervor due to weak retail participation owing to a Gudi Padwa holiday while Banks, money and foreign exchange markets remained closed on the Maharashtrian New Year day. But sentiments got buttressed in afternoon trades after the investment firm Goldman Sachs in its latest Asia-Pacific Quarterly Outlook report upgraded Indian stocks to marketweight from underweight, citing reasons that the domestic growth is likely to pick up, while stock valuations remain relatively attractive. Besides, at a time when Indian oil and gas companies incurring hefty losses and subsidies burden has shown little signs of coming down, the government initiated gas pricing reforms to incentivize production of natural gas. Index heavyweight Reliance Industries surged over 1% on reports that the government approved its $1.5 billion plan to produce over 10 million standard cubic meters of gas per day from four satellite fields in the KG-D6 block. The upmove in markets also was adequately supported by the gains in information technology shares, not only because of the rupee’s depreciation to nine week lows, but also amid reports that India's flagship software services providers are seeking an image makeover in the US ahead of the presidential election. Also the rate sensitive counters regained some traction after the heavy pounding they suffered in the previous session. However the metal index failed to shine in the session as the decline in heavyweights like Tata Steel and Jindal Steel weighed. The optimistic start in European markets provided the much needed fillip to local bourses as they moved in tandem with their Euro-zone peers. Finally, the BSE Sensex gained 165.27 points or 0.96% to settle at 17,361.74, while the S&P CNX Nifty rose by 49.75 points or 0.95% to close at 5,278.20.