Weaker start on cards for the markets on F&O expiry day

The Indian markets reversed their last session gains on the penultimate day of the F&O series expiry with benchmark indices losing their crucial levels. Today is the expiry of long March series, which has panned out be a treacherous one for the markets and the feeble global cues are likely to lead a weak start at local fronts too. Nifty might be seen below the 5150 in the very early trade. Volatility is likely to appear in latter part of the day when traders will finally rollover their positions to the new series. The materials and commodity stocks are likely to remain in somber mood tailing their global counterparts. The banking stocks too may remain in somber mood over concerns that high cost of funds and rising bad loans could dent earnings. Meanwhile, the government is considering changing profit-sharing mechanism for oilfield contracts before launching the next round of bidding for oil and gas blocks.

The US markets extended their losses on Wednesday and the major indices closed lower by about half a percent on getting a weaker-than-expected report on durable goods orders. Also, Federal Reserve Chairman Ben Bernanke warned that it is “far too early to declare victory” on the US economy. Material and energy stocks were the major laggards as durable goods orders in February rose 2.2% against expectation of 2.9%. The Asian markets have made a weak start and most of the indices are trading lower by half to over a percent on weak economic data from US and rise in the crude prices. Chinese market has enlarged its losses as the slowing economy hurts earnings. The Japanese market was trading lower despite the retail sales rising more than forecast in February.

Back home, stock markets in India lost most of the gains they amassed in the previous session as the benchmark equity indices shrank by about a percent a day ahead of March series futures and options (F&O) expiry. The frontline indices traded with moderate cuts in a narrow range through the first half of trade but hefty selling pressure in the late hours dragged the gauges to session’s lowest levels. There did appear some short covering in the dying moments of trade which only helped the key indices to settle off the day’s lows. In the event of downfall, the benchmarks breached the important technical 5,200 (Nifty) and 17,200 (Sensex) levels as investors chose to book profits largely across the board.  Meanwhile, government announced its borrowing calendar in which union government has planned to raise Rs 3.7 trillion through bond sales during April-September, 65% of the government's gross borrowing target of Rs 5.7 trillion for 2012/13. Despite the borrowings being largely in line with broad expectations, marketmen lacked conviction to open fresh positions amid fears of spiking bond yields which at one point in time shot up to 8.62% and is not likely to move below the 8.5-9% range in the first half of FY13.  Investors were seen squaring off hefty positions from the rate sensitive Banking and Realty counters which got plummeted by over one and half a percent each and weighed on the frontline gauges. The Consumer Durables index on the BSE sectoral space languished at the bottom of the table with a nasty over three percent laceration. On the other hand, investors continued to show buying interests for defensive bets like FMCG and Healthcare which settled on a positive note with about a quarter percent gains. Besides, shares of Vijay Mallya promoted UB Group companies such as United Spirits, United Breweries (UBL), United Breweries (Holdings) and Kingfisher Airlines remained in limelight in the day amid reports that Heineken may buy 12-13 percent of Chairman Vijay Mallya's stake in United Breweries (UBL). Finally, the BSE Sensex lost 135.74 points or 0.79% to settle at 17,121.62, while the S&P CNX Nifty declined by 48.40 points or 0.92% to close at 5,194.75.