Markets to continue the weakness with a soft start of new series

The Indian markets suffered sharp sell-off in last session and the benchmark indices posted their worst one day loss in last three months. The geo-political worries played the spoilsport and the September series ended on a tepid note. Today, the start of the new series is likely to be a bit soft on the weak global cues and due to the rising border tension, though markets may see some stabilization and recovery in latter trade. There will be some support with the report that Employees’ Provident Fund Organisation (EPFO) has decided to invest 10% of its annual incremental deposits or an estimated Rs 13,000 crore in the current fiscal in equity exchange traded funds (ETFs). Meanwhile, GST Council chaired by Union Finance Minister Arun Jaitley will be meeting today and will finalise the rules regarding registration, refunds and payment and also take a view on exemption of goods under the upcoming Goods and Services Tax (GST) regime. It will also deliberate on a formula for payment of compensation to states for revenue loss in the aftermath of implementation of the GST. However, there will be some concern too, with a report from Labour Bureau stating that  unemployment rate in India has shot up to a five-year high of 5 percent in 2015-16, with the figure significantly higher at 8.7 percent for women as compared to 4.3 percent for men. There will be some buzz in the telecom stocks, ahead of the start of India’s largest spectrum auction tomorrow.

The US markets suffered sharp drop in last session after there was steep drop by shares of Deutsche Bank, which fell sharply on reports that several hedge funds have withdrawn excess cash and positions held at the lender. Though, the GDP showed stronger growth than expected in second quarter. The Asian markets have made mostly a lower start, with some indices losing about a percent in early deals, tailing the fall in US markets and traders moving out of riskier assets to haven assets.

Back home, last session of September F&O series turned out to be a big disappointment for the Indian benchmarks which disintegrated like a ‘house of cards’ and went on to breach many key technical levels in around two percent freefall. After a smart up move in opening trades, Indian equity indices witnessed a panic selling in noon session after the Indian army said it has conducted surgical strikes on Wednesday night on terrorist launch pads in Pakistan, killing several terrorists and causing significant casualties to their hideouts. The Army said special commandos crossed the LoC last night, conducted the operation in the Pakistan-Occupied Kashmir (PoK) and returned to the Indian side without any casualty. India had repeatedly warned Pakistan not to allow its territory to be used for terrorist activities. Besides, India had called for an international diplomatic boycott of Pakistan as it shielded terrorists on its land. At the United Nations General Assembly, External Affairs Minister Sushma Swaraj said Pakistan was a terror state and it need to rein in terror elements. Though, investors got some respite in afternoon session after Niti Aayog Chief Amitabh Kant said the market should be confident and take government's move positively, selling once again intensify in late afternoon session after Pakistan Prime Minister Nawaz Sharif strongly condemned the unprovoked and naked aggression by India along the LoC and said Pakistan's armed forces are fully capable of defending the territorial integrity of the country. Sharif also warned that Pakistan's intent for peaceful neighborhood should not be mistaken as its weakness. The fear among investors was palpable all over, as Nifty VIX spiked some 35 percent to hit a three-month high to 19.12.  Anxiety was not limited to stocks markets; rupee and bonds too plunged after the army said it attacked terrorist camps in Pakistan. The weakness in domestic currency intensified amid concerns that foreign investors, who have pumped in about Rs 50,000 crore into domestic stocks so far this year, may run for the exit door if the tensions were to rise further. Finally, the BSE Sensex declined by 465.28 points or 1.64% to 27827.53, while the CNX Nifty dropped 153.90 points or 1.76% to 8,591.25.