Markets likely to get a positive start of F&O expiry day

Indian equities once again lost their way and closed lower on Wednesday. Though the second half bounce back helped the markets to recover most of the losses, but there was concern regarding the government’s policy indecision, as the much awaited diesel price hike looked distant with the recent opposition from the constituents of the UPA government. The earnings announcements of the day, too were disappointing and weighed on the sentiments. Today is the expiry of July F&O series and the start may be positive but the trade is likely to turn volatile in the latter part of the day, unwinding of positions in the stocks being removed from the futures and options segment of NSE will add pressure, out of the 51 excluded stocks, 44 ended with losses in last session. The aviation sector stocks will be watched today after the International Air Transport Association said that India’s aviation is in a multi-faceted crisis. Traders will also be eyeing the movement of monsoon as deficient rains are likely to impact a weak market much more adversely. Rate sensitives’ too may remain cautious as Pronab Sen, principal adviser to the Planning Commission has said that the Reserve Bank of India will likely keep interest rates on hold in its policy review next week despite slowing economic as weak seasonal rains have raised chances of inflation accelerating again.

There will be lots of result announcements too, to keep the markets buzzing. ACC, Ambuja Cements, BHEL, ITC, MCX, Sterlite Inds, Tata Comm and Thermax are among many to announce their numbers today.

The US markets ended mixed, while Dow made some recovery after three straight days of losses, mainly on a report that the Federal Reserve is moving closer toward further stimulus to support the faltering economy. Also there were some better than expected corporate earnings that helped the markets to recover. The Asian markets have made a mixed start though some of the indices are recovering from their four days losing streak on encouraging signs from US, however there was some weak economic reports from within the region and the European crisis too lingered with no solution in sight.

Back home, domestic benchmarks resumed their southward journey after a day of halt and snapped the day’s trade in the negative terrain. The investors remained on the sideline on penultimate session of July series Futures and Options expiry with total volumes recording second highest turnover at Rs 3 lakh crore. The sentiments remained subdued after the NSE took decision to remove 51 stocks from the F&O segment with effect from July 27, 2012. Also telecom companies’ shares butchered during the session as decision on spectrum fee by the EGoM headed by Home Minister P Chidambaram was deferred. Moreover, shares of three state-run oil marketing companies fell on report the government is unlikely to raise prices of diesel, cooking gas and kerosene in the near future for fear of opposition across the political spectrum. Fall in Rupee against dollar too dampened the sentiments, the rupee declined to 56.28/30 from its previous close of 56.12/13. Investors remained concerned on mounting qualms over the government’s ability to launch few important reforms amid stiff resistance from various UPA allies and Opposition parties. Also, monsoon has been a major disappointment this year with near-drought situation across several parts of the nation. This has stoked speculation of a spike in food prices going forward, which propelled sell-off and key benchmarks lost their psychological 5,100 (Nifty) and 16,800 (Sensex) bastions. FMCG counters also helped markets to limit losses. The investors were taking interest in FMCG stocks after some of the companies like HUL, Dabur and Colgate-Palmolive reported better-than-expected Q1 numbers. However, selling in Metal sector pressurized markets till end and remained the top loser. Shares like SAIL, Jindal Steel & Power, Hindalco Industries, Sterlite Industries, Sesa Goa, Tata Steel and Nalco edged lower in the trade after the International Monetary Fund said China’s economy faces significant downside risks. China is the world's largest consumer of copper and aluminum. Finally, BSE Sensex lost 72.03 points or 0.43% to settle at 16,846.05, while the S&P CNX Nifty declined by 18.60 points or 0.36 to close at 5,109.60.