Markets likely to get a gap-down start; Sensex to open below 16750

The Indian markets were not a different story on the final trading day of the last week and intense selling was witnessed on the street with major indices suffering cut of about two percent each. But the concerns were more local than the global one, government’s proposal to review India’s exclusive tax avoidance treaty with Mauritius coupled with the plunge of rupee to an all time low, spooked the markets. Today, the start is likely to be a gap-down one as the regional cues continue to remain feeble. Concerns of Mauritius tax treaty review fears are likely to prevail in the markets along with the GAAR issue. Traders will remain cautious ahead of the industrial production data to be announced later in the week. Meanwhile, RBI has eased some curbs to attract dollars from NRI’s and scrapped interest rate ceiling on exporters’ foreign currency credits, its impact may be seen on the rupee. The pharma companies too are likely to see some movement as the Planning Commission has called for getting more compulsory licences issued for patented and expensive drugs with a view to build up drug security in the country.

There will be lots of scrip specific actions based on their result announcements. Andhra Bank, Bank of India, Bosch, Glaxosmithkline Consumers, Glaxosmithkline Pharma, HDFC and Tata Elexi are among the many to announce their numbers today. 

The US markets went for sharp sell-off on Friday on getting lower than expected jobs number, making it their worst weekly closing of the year so far. All the Asian markets have made a weak start trading lower by over one and half a percent on growing concern over Europe’s debt crisis after Socialist Francois Hollande was elected president of France.

Back home, Indian stock markets got obliterated on the week’s last trading session with the frontline equity indices tumbling close to two percentage points and underperforming all their peers across the globe. The benchmark indices not only extended the southward journey for third straight session but even breached the important psychological 5,100 (Nifty) and 16,900 (Sensex) levels. Apart from the gloomy global tidings, the exacerbating concerns over depreciating Indian rupee took center stage in the session, prompting investors to ruthlessly square off hefty positions across the board. It turned out to be a freefall of sorts as the benchmark equity indices struggled to find a bottom in through the day and even drifted to the lowest levels in around three and half a month. The 50-share Nifty breached its 200 day moving average of 5,119.88. Indian rupee crashed to Rs 53.82 against the US dollar and is dangerously close to the all-time low levels even as modest intervention by the country’s central bank on Thursday failed to stem the rupee’s slide. The immediate trigger for the decline has been a rising dollar demand from importers, but a deteriorating macroeconomic situation, years of policy uncertainty and decades of fiscal mismanagement, coupled with renewed risk-aversion among global investors is leading to weak foreign fund inflows, which is in turn widening the country’s budgetary deficit and further corroding its currency’s value. The Capital Goods counter got bludgeoned by close to four percent and remained the top laggard in the space while the rate sensitive-Banking pocket too bore the brutal brunt of hefty position squaring and plummeted by over three percent. The disappointing quarterly earnings announcement by bellwether Bank of Baroda did not go down well with investors. Amid the across the board carnage, the defensive Healthcare counter managed to keep its head above the water with moderate gains of around a quarter percent. On the global front, cues from Asian region remained sluggish with most markets ending in the red terrain as investors grew increasingly worried over the global growth prospects after getting a worse than expected reading on the American non-manufacturing sector, amid lingering concerns over Euro-zone’s spiraling debt crisis and  slowing Chinese growth machine. Finally, the BSE Sensex shaved off 320.11 points or 1.87% to settle at 16,831.08, while the S&P CNX Nifty plunged by 101.55 points or 1.96% to close at 5,086.85.