Markets to make a soft start on weak global cues

The Indian markets made a handsome recovery in tandem with the global markets and despite some profit booking at higher levels the major indices were able to post gain of over one and half a percent in last session. Today, the start is likely to be soft-to-cautious and the even some selling can appear at higher levels. The pull-back of last session was a mostly due to short covering and the investors are still averse of remaining invested in the risky assets. Meanwhile, the RBI is expected to continue tightening policy in coming months until inflation peaks, despite increasing uncertainty over a global economic slowdown.

The telecom stocks may see some reaction as the Department of Telecom (DoT) has decided to give the Telecom Regulatory Authority of India (Trai) more powers regarding spectrum management to obtain reviews and recommendations on the entire range of present spectrum usage.

There will be lots of scrip specific actions coupled with result related reaction to keep the markets buzzing. Abbott India, Amtek Auto, Apollo Tyres, Castrol India, Parsvnath Developers, Tata Motors, Reliance Power, Reliance Infra and Rolta India are among the many to announce their numbers today.

The US markets got hammered again on Wednesday, recoiling all their gains of previous session. With fears of a fresh financial crisis on the rise, US President Barack Obama met with Federal Reserve chairman Ben Bernanke, a day after the Fed announced it would offer super-low interest rates for two more years. Fear of debt crisis rocking a handful of smaller European nations came on forefront and investors fled to safe haven from risky assets. The Asian markets have made a mixed start and barring few most of the indices are in red in early trade.

Back home, the relief rally finally came through on Wednesday as marketmen enthusiastically resorted to hunt for undervalued fundamentally strong bargains amid evaporating jitters over US sovereign debt rating downgrade. The bounce back came after six successive sessions of downtrend in which the BSE’s Sensex suffered a gargantuan loss of close to one thousand five hundred points while the NSE’s Nifty suffered staggering losses of around four hundred fifty points amid the ongoing pandemonium on both sides of the Atlantic which had shaken investor sentiment across the world. But sentiments remained positive since the start of trade on Wednesday as investors welcomed Fed’s announcement overnight to keep the interest rates unchanged at ultra low levels through mid 2013. While, the Fed statement that it was reviewing available tools to boost the slowing US economy also bode well for local investors as it indicated that policy makers will take steps to spur growth and restore investor confidence amid the global market turmoil. Earlier on Dalal Street, the benchmark jumped nearly four hundred points or over two percent on the opening bell in line with Asian markets as the US Federal Reserve pledged to keep interest rates on hold. The frontline indices managed to hold on to the momentum for most part of the morning session but reports of South Korean military firing two artillery rounds after hearing three explosions coming from the North near the disputed sea border, brought the indices off the day’s highest levels. Thereafter, heightened volatility evident in European markets and US futures pulled the local indices to the lowest levels in the session. But value picking intensified in the dying hours of trade helping the benchmarks in breaking the six session downtrend and staging a strong performance. Eventually the NSE’s 50-share broadly followed index Nifty, surged by over one and half a percent to settle above the crucial 5,150 support level while Bombay Stock Exchange’s Sensitive Index, Sensex amassed over two hundred fifty points and ended above the psychological 17,100 mark. The broader markets too traded with conviction after the recent butchery and outclassed their larger peers by quite a margin.  On the sectoral front, the rate sensitive counters like Automobile and high beta Real Estate garnered maximum traction after being badly butchered in the recent past. Information Technology, another oversold pocket, bounced back on hefty short covering as the overnight surge in US and European markets helped improve sentiments. On the other hand, the FMCG counter languished at the bottom of the table with losses in heavyweights like ITC, HUL and Nestle. The downstream PSU oil companies like IOC, HPCL and BPCL also remained under tremendous selling pressure. Finally, the BSE Sensex surged 272.60 points or 1.62% to settle at 17,130.51, while the S&P CNX Nifty soared by 88.15 points or 1.74% to close at 5,161.00.

The US markets resumed their downward journey on Wednesday and erased the prior day’s gains as banks slumped on concern that Europe will fail to contain its debt crisis and that the economy is faltering. Investors were also unnerved by the worries that France may have to support its banks and face a downgrade of its credit rating.

The last session rally that was led with Federal Open Market Committee decision to keep benchmark interest rates near zero to help prop up a recovery, progressing slower than the central bank had anticipated was washed out on concerns of Europe’s sovereign-debt troubles and investor are sensing debt crisis to be brewing larger than anticipated.

Fears of a ‘repeat of 2008’ and also on the growing belief that the economy may be sliding towards recession have led many individual investors to sell stocks and other risky assets. The benchmark indexes came off session lows after Societe Generale, the second biggest bank in France, issued a broad denial of all market rumors following speculation about the nation’s credit worthiness, which sent the expense of insuring French government debt to a high.

The Dow Jones industrial average lost 519.83 points, or 4.62 percent, to 10,719.90. The Standard and Poor's 500 closed lower by 51.77 points, or 4.42 percent, to 1,120.76, while the Nasdaq composite was down by 101.47 points, or 4.09 percent, to 2,381.05. 

Crude prices showed a smart pullback on Wednesday and rose over 4 percent in the day supported by sharp pullback in the equities market and after a government report showed oil inventories fell last week. US crude stocks fell 5.2 million barrels last week, the US Energy Information Administration's said in its weekly inventory report. Distillate stocks fell 700,000 barrels and gasoline stockpiles fell 1.6 million barrels.

The prices also got a boost with a preliminary government data stating that  China's implied oil demand in July rose 7.7 percent over a year earlier, picking up from June, which had the slowest growth in over two years.

Benchmark crude for September rose $3.59, or 4.53 percent, to settle at $82.89 a barrel, after trading in a range from $79.53 to $83.14 on the New York Mercantile Exchange. In London, Brent crude settled at $106.68 a barrel, gaining $4.11 on the ICE.