Markets likely to get a gap-up start; borrowing calendar eyed

The Indian markets suffered sharp sell-off in last session apart from the global worries various domestic factors came in front to spook the markets. General Anti-Avoidance Rules (GAAR) coming into effect from next week April 1 acted as the main sentiment spoiler of the markets.Foreign institutional investors (FIIs), especially those using the Mauritius route, went for selling to avoid possible scrutiny from tax authorities. Today, the beginning is likely to be good and the indices may get a gap-up start. Though it is the F&O series expiry week and the volatility cannot be ruled out, but after last session’s brutal hammering the markets are likely to bounce back on triumphant global cues. On domestic front, Finance minister Pranab Mukherjee clarification that there was no 'vindictive intention' behind the move to retrospectively amend the income tax act may have some soothing impact on the markets. The realty developers based in Mumbai, who suffered sharp sell-off in last session too might see some recovery as the state government on Monday deferred plans to hike stamp duty for leave-and-licence agreements for residential and commercial properties. Traders will be eyeing the government’s borrowing calendar to take further cue of the economy.The borrowings are expected to be heavy in the first half because of redemption and the government is likely to borrow between 3.6 trillion and 3.8 trillion rupees from the domestic market in the first half of the fiscal.

The US markets surged on Monday and all the major indices gained over a percent on hopes of an economic stimulus after Federal Reserve chairman Ben Bernanke warned about long-term unemployment in the country. Bernanke said that 'continued accommodative policy' is needed to support the economy's recovery. The Asian markets have made a jubilant start, gaining most in last two week on Bernanke's comment to focus on creating jobs and South Korea’s consumer confidence improvement report.

Back home, stock markets in India suffered a lethal blow on the first day of F&O expiry week of March series as the benchmark equity indices suffered a nasty, close to two percent laceration on humungous volumes and drifted to the lowest levels seen in last two months. The important psychological 5,200 (Nifty) and 17,100 (Sensex) levels remained strong supports for the frontline indices for most part of the day however, sentiments got dampened in the late hours which pulled the key gauges below those crucial levels by the end. Foreign funds feared that with the new set of tax norms, General Anti-Avoidance Rules (GAAR) coming into effect from next week April 1, 2012, the income tax department will have the power to deny individuals and entities the benefits of any tax avoidance treaty that may presently exist. This raised the prospects that the government could tax so-called participatory notes, or P-Notes, through which nearly 17% foreign investors buy into Indian equities, that represents about Rs 1.8 lakh crore. The rate sensitive counters like Realty continued to do bulk of the damage after reports that Maharashtra government in order to increase its revenues has proposed a steep hike of 160 times in stamp duty for leave and license agreements for residential and commercial properties. The news weighed heavily on most developers including Indiabulls Real Estate, Oberoi Realty and Housing Development & Infrastructure. While, the Banking index too got bludgeoned on concerns that the RBI may not cut interest rates in view of high international crude oil prices and ahead of the government's borrowing calendar due this week. Market participants also remained worried over the nation’s fiscal deficit target and amid speculations that inflationary pressure on the economy is likely to resurface. Amid the depreciating rupee and spiking international crude oil prices, the resurfacing inflation concerns multiplied the worries of investors because there was excise duty and service tax increases in the budget, which is feared to add to inflation. Besides, sugar stocks failed to move higher ahead of an Empowered Group of Ministers (EGoM) meeting which may decide on allowing an additional one million tonne of sugar export in the 2011-12 marketing year. Finally, the BSE Sensex plunged by 308.96 points or 1.78% to settle at 17,052.78, while the S&P CNX Nifty shaved off 93.95 points or 1.78% to close at 5,184.25.