New series to get a flat-to-cautious start

The Indian markets despite witnessing huge choppiness managed a green close on the F&O June series expiry day. Though there was not much to support the markets but sentiments got boosted by the PM and Finance Minister Manmohan Singh’s assurance of reversing pessimism from the domestic economic environment, while there was hopes that European summit will bring some solution to the crisis ridden region. Today, the start of the new series is likely to be flat-to-cautious as the global cues remain pessimistic. The Reserve Bank of India has said that risks to financial stability had worsened since December because of a mix of global factors and domestic macroeconomic conditions. The apex bank has also said that India is likely to face elevated inflation risks from supply bottlenecks and lingering threats to economic expansion. Meanwhile, giving some respite to the foreign investors it was reported that the government will resolve all outstanding tax issues in the next couple of weeks to clear the air on controversial retrospective change in the income law to allow India to tax overseas transactions involving Indian assets.

The US markets closed lower on Thursday, weighed down by pessimism about the ability of the European summit to ease the region's debt crisis and concerns about global banks. Though, the start was good but indices gave up their gains with a surprise Supreme Court ruling upholding a landmark healthcare law, which is being considered by many as business unfriendly administration. The Asian markets have mostly made a soft start on skepticism of European Union leaders making progress on the region’s debt crisis. The Japanese market is suffering the most as the yen strengthened against all 16 major peers

Back home, the June series futures and options contract expiry day largely turned out to be a quiet session for the stock markets in India as the session lacked the flavor of high volatility, which typically surfaces on F&O contract expiry day. Nevertheless, the frontline indices managed to extend the consolidation phase for the third session in a row and snapped the session with marginal gains. The key gauges tightly held on to the psychological 5,150 (Nifty) and 17,050 (Sensex) levels and settled a tad below those levels. Sentiments were positive a day ahead of Market participants remained reluctant to open fresh positions ahead of the important Euro-Zone leaders' Summit since the pressure on Euro-zone leaders intensified amid speculations that Spain is sliding closer to a bailout as the region’s recession deepens and government faces unsustainable cost of debt refinancing. Moreover, the encouraging US economic reports, which showed long-lasting US manufactured goods demand rebounded in May and a gauge of business spending plans increased went on to temper concerns that a European summit would do little to solve the region's debt crisis. On the domestic front, sentiments were supported by India’s new Finance Minister and Prime Minister Manmohan Singh’s statement that he has directed urgent steps to reverse the climate of pessimism and revive the animal spirit. Moreover, cues from the money market remained supportive as the Indian rupee snapped its streak of depreciation against the dollar and strengthened to the 56.89 mark against the US dollar. Shares of tyre manufacturers like Apollo Tyres, MRF and CEAT got pummeled in the range of 2-4% after reports indicated that Competition Commission of India’s probe on tyre companies was underway and an order was likely in the next 10 days. On the BSE sectoral space, the defensive FMCG counter climbed close to a percent and remained the top gainer in the space followed by the Power and PSU pockets, which ended with gains of under half a percent. However, investors were seen booking mild profits in the Oil & Gas and rate sensitive Bankex counters, which slipped by one third of a percent and capped the upside chances for markets. Finally, the BSE Sensex gained 23.00 points or 0.14% to settle at 16,990.76, while the S&P CNX Nifty rose by 7.25 points or 0.14% to close at 5,149.15.