Markets likely to get a flat start on first day of F&O expiry week

The Indian markets showed a smart bounce back from intraday low levels in last session and closed with marginal losses as there was not much cue to take the markets higher. Value buying in some beaten down counters like the high beta Realty lent their support to domestic markets on Friday. The first day of June series futures and options (F&O) contract expiry week is likely to start on a subdued note and investors would be closely watching the developments in European region for further direction. Traders will be eyeing the movement of rupee which has depreciated to fresh historical lows and its further downslide may undermine market sentiments. However, the government has plans to unveil measures to boost the economy and shore up the falling rupee to allay price pressures and boost the cost to companies of repaying foreign debt.

Meanwhile, the retail stocks are likely to be in positive mood as the narrowing window of opportunity to act will likely force the government to undertake some long-overdue economic reforms like implementing FDI in multi-brand retail within the next three to six months. Apart from this there will be lots of scrip specific actions to keep the markets buzzing.

The US markets managed a green close over the weekend as sentiments got supported by the rally in the late trades after a choppy start. A rebound by banks and health-care shares helped push blue chips higher while investors also focused on the cues from the Euro-zone after the Moody's announced credit downgrades, ranging from one to three notches. The Asian markets have mostly made a negative start and barring the South Korean benchmark which plunged over one and half a percent, most indices most are trading with about half a percent cuts.

Back home, stock markets in India showcased a remarkable turnaround on the week’s last trading session as the frontline equity indices, after hitting the lowest point of day in early afternoon trades, took a turn for the better, trimming the session’s over a percent losses and eventually settling with moderate cuts of around one third of a percent. The frontline gauges’ failed to extend their gaining streak as they halted their three session uptrend amid depressing cues from domestic money markets along with global risk aversion from riskier asset classes like equities. After the gap down opening not many had hoped that Indian bourses would stage such a bounce back especially on a day when stock markets across the Asian region got thrashed as investors in the region remained influenced by disappointing cues from overnight US markets while weak manufacturing activity indications from the US, Europe and China stoked worries about global economic slowdown. However, the psychological 5,150 (Nifty) and 17,000 (Sensex) levels proved as strong support levels for the key indices, which closed just below those levels. Sentiments were undermined by the discouraging cues from money markets were the beleaguered rupee extended its streak of depreciation and went on to hit historical lows of 57.23 against a dollar amid increased demand for the greenback. But the late recovery in Indian currency from intraday lows provided the much needed support to domestic bourses. Moreover, the concerns over farm output in India, one of the major producers and consumers of food products too eased to some extent after reports from Meteorological Department indicated that India’s crucial monsoon rains are still expected to be average in 2012, despite the scanty rainfall in the first three weeks of June. On the BSE sectoral space, value buying was evident in the high beta Realty counter, which closed with over half a percent gains and remained the top gainer in the space followed by marginal gains in Auto and Power sectors. On the flip side, hefty selling pressure was seen in the Metal counter which got pummeled by over one and half a percent. Moreover, the fall in Capital Goods and TECk sectors of around half a percent each also exerted some pressure on the bourses. Finally, the BSE Sensex lost 60.05 points or 0.35% to settle at 16,972.51, while the S&P CNX Nifty declined by 18.95 points or 0.37% to close at 5,146.05.