Markets likely to extend the consolidation mood

The Indian markets went through a choppy trade in last session and after a series of ups and downs, closed with modest cuts. Profit booking in power and realty took the markets lower. Today, the start is likely to remain flat and the consolidation mood may extend for yet another day. Traders will be eyeing more political development and reforms from the government after Finance minister P Chidambaram cleared a proposal to raise foreign direct investment limit in insurance and pension sectors to 49%, which was deferred because of opposition from allies such as Trinamool Congress. However, there is good news for manufacturing and infra companies, as the government and RBI have further eased overseas borrowing norms for Indian companies by allowing those in the infrastructure and manufacturing space to refinance a higher level of their rupee loans using external loans. Traders will also be eyeing the movement of rupee that is likely to strengthen after the dollar weakened overnight on hopes of a QE 3.

The US markets made a mixed closing on Wednesday, though in late trades there was a rebound after the minutes of the latest Federal Reserve policy meeting showed growing support for additional stimulus very soon, unless the economy improves considerably. The Asian markets have mostly made a positive start on rising hopes that central banks in the US and China may ease monetary policy to support the economies. Chinese market was up ahead of the Flash PMI Data; however the Japanese market was showing steady trade with a negative bias.

Back home, after showcasing a strong performance in the last session, stock markets in India slipped into consolidation mode on Wednesday, as investors booked their profit due to lack of fresh trigger. Though, in the last leg of trade, bourses gained some strength and got its green trajectory back but the psychological 5,450 (Nifty) and 17,900 (Sensex) levels proved as difficult nuts to crack for the frontline indices and the benchmark equity indices snapped the session with trivial losses. The markets hardly budging from their previous closing levels as investors lacked conviction to open fresh positions amid a lot of uncertainties surrounding the global as well as domestic markets. The key gauges gyrated in a tight range in negative territory for most part of the day as sentiments remain subdued as interest rate sensitive realty shares fell on profit booking after recent gains, triggered after data released last week showed that the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth. Moreover, power space still feeling the impact of CAG report and declined by about 0.80 percent. Private power producers like Tata Power, RPower, Adani Power, GMR Infra and Reliance Infrastructure all edged lower as CAG report said the loss was due to allocation of coal mines to private players. some pressure also came in after both the houses of Parliament were adjourned for a second consecutive day after the opposition parties created a ruckus over the Comptroller and Auditor General’s report on coal block allocation. The CAG reports have estimated ‘undue benefits’ of over Rs 3.06 lakh crore to private parties in coal block allocation without bidding. However, the losses remained capped on report that the Finance Ministry has approved foreign direct investment in insurance and pension sectors up to 49 percent. Finally, the BSE Sensex lost 38.40 points or 0.21% to settle at 17,846.86, while the S&P CNX Nifty declined by 8.15 points or 0.15% to close at 5,412.85.