Markets likely to get a soft-to-cautious start

The Indian markets despite a very volatile trade managed to close higher by over a percent in last session, the FM’s assurance that GAAR, which will come into effect on April 1, will not harass honest taxpayers, but is aimed at tax evaders gave some respite to the investors. The Finance ministry sources too clarified that it’s not aimed at P-notes. Today, the start is likely to be soft-to-cautious and the volatility to persist on the penultimate day of the F&O series expiry. The GAAR issue is likely to continue weighing on the sentiments of the investors. Meanwhile, the government along with RBI has finalized its borrowing calendar and will raise Rs 3.7 lakh crore or 65% of its total borrowing from the market by issuing bonds during the first half of 2012-13. On an average, the government will borrow around Rs 15,000 crore every week. There will be buzz from the markets as well, as BSE on Tuesday suspended trading in securities of 49 companies for non-compliances of various clauses. Apart from this there will be lots of scrip specific movements in the market.

Meanwhile, Finance Minister Pranab Mukherjee, bowing to pressure from jewellers and demands in Parliament hinted at a rollback of the excise duty on unbranded jewellery but ruled out going back on the hike in import duty on gold and platinum.

The US markets reversed some of their gains on Tuesday following lackluster housing and consumer confidence data. The Conference Board said that its consumer confidence index pulled back slightly in March to a reading of 70.2, slightly lower than expected. The Asian markets have made a weak start with most of the indices trading lower by around half a percent in early session. Leading the pack is Japanese market down by over a percent, witnessing profit booking after the index erased losses since the country’s record earthquake in March 2011.

Back home, markets witnessed extreme volatility on Tuesday, a day after going through brutal beating of around two percent. Though, the start was a gap-up one supported by the surge in US markets overnight and the jubilant opening of the Asian peers who rejoiced a possibility of stimulus in US to ramp up the economic recovery pace, but the domestic markets could not hold up to their gains long and slipped to their lowest point of the day within an hour, on concerns of the General Anti-Avoidance Rules (GAAR) provisions being enforced from next week April 1, 2012. There has been general concerns among the FII’s, as the government under the new norm could tax participatory notes (P-Notes), which are issued by foreign portfolio investors registered with Indian market regulators to overseas investors. FII’s could either sell holdings in order to avoid the potential tax or they may shift base to locations that could provide a way to avoid payments. In last two months, many FIIs transacting through Mauritius were seen unwinding positions there and taking fresh positions in Singapore. Back on street the markets got some recovery in the late morning trade supported by the gains in consumer durables and realty stocks. There was a sudden spurt seen in the markets in the late noon session, taking the benchmark indices to the high points of the day on the Government’s clarification that it will not target Participatory Notes in its newly proposed rules targeting tax avoidance. However, the enthusiasm soon got fizzled out and the marketmen opted to book profit taking the indices lower, lacking much clarity on the GAAR issue as the P-Notes will continue to be under the new norms. In the last leg of the trade markets once again ramped up adding gains with shorts being covered at the lower levels. All the sectoral indices turned in green and consumer durables and realty maintained their lead. Fast Moving Consumer Goods (FMCG) metal and technology were the other leading gauges. The Maharashtra based real estate developers bounced back after being pummeled down in last session as the state government deferred plans to hike stamp duty for leave-and-licence agreements for residential and commercial properties. The major indices finally recovered over a percent. Though, the broader indices missed the fire and closed marginally lower for the day. Finally, the BSE Sensex climbed by 204.58 points or 1.20% to settle at 17,257.36, while the S&P CNX Nifty surged 58.90 points or 1.14% to close at 5,243.15.