Markets likely to turn weak on sluggish global cues

The Indian markets remained in consolidation mood, though managed to close in green but there was sharp slide in the final hours on fear of global economic recovery and stalled reform hopes on political deadlock over CAG reports, after main opposition BJP-led NDA sticking to its demand for Prime Minister Manmohan Singh's resignation on the coal block allocation issue. Today, the start is likely to be weak on sluggish global cues. RBI’s statement, that lower interest rates alone won't pull the economy out of malaise is likely to put further pressure on the sentiments.  Profit booking too cannot be denied amid the political uncertainty. Meanwhile, the PSU oil marketing companies are likely to keep buzzing on talks that OMCs are putting pressure on the government for a hike as Indian basket of crude oil increased by over $10 to $113 per barrel since last revision and the petrol prices are expected to go up by around Rs 3 a litre after the monsoon session of Parliament ends in the first week of September.

The US markets closed lower on Thursday amid rising hopes of stimulus across the globe after economic data indicated stalling global growth. The number of Americans filing new claims for jobless benefits unexpectedly rose last week and Chinese flash manufacturing purchasing managers index fell to its lowest level since November. The Asian markets have made a weak start with all the indices in red and lots of them witnessing cut of over a percent on concerns of slowing global growth. There was also disappointment that European leaders were not making any significant progress in solving the region’s debt crisis. Chinese market was weighed down by weak PMI data and a report that the government is studying further measures to strengthen its control of the property market.

Back home, the key Indian equity indices, after trading jubilantly in the first half, erased almost their day’s gains, snapping the session nearly unchanged as investors booked their profit at higher levels. After slipping near intra-day’s lows in the wee hours of trade, benchmarks slug hard to wind-up in green territory by the close of the trade. Though, the Sensex came close to the 18,000 mark while the Nifty almost touched 5,450 level in the first half. The two main Indian stock indices were up about a percent each on mounting speculation that leading global central banks may ease monetary policy to boost their economies. The mood remained cheerful in the morning buoyed by strong FII inflows. Provisional data showing that foreign institutional investors (FIIs) remained net buyers of Indian stocks on Wednesday, August 22, 2012, boosted sentiment. Foreign institutional investors (FIIs) bought shares worth net Rs 96.63 crore from the secondary equity markets. Software stocks supported the sentiments through the day’s trade after minutes from the US Federal Reserve showed that the central bank’s policy committee discussed a third round of quantitative easing at its last meeting. Moreover, metal space too aided the sentiments garnering over half a percent gains as global commodity futures advanced in Asia on expectations of further easing of monetary policy from US and China. Revival of monsoon rains this month too cheered the sentiments, India's monsoon rains were slightly below average in the past week, but heavy downpours in Rajasthan eased fears of a repeat of the widespread drought that gripped the country three years ago. The overall rainfall deficit has narrowed from 36% earlier to 15% in the last few days, which has pushed up sowing of rice and cotton over their normal acreage. The rupee to its highest level in more than a week after the government made it easier for companies to tap overseas funds. The Centre has eased overseas borrowing rules, including allowing non-resident entities to provide some guarantees for external borrowings. However, the gains remain capped as pressure came in from oil and gas space, which lost over a percent led by index heavyweight Reliance Industries, which lost over one and half a percent due to worries about lower refining margins. Finally, the BSE Sensex gained 3.36 points or 0.02% to settle at 17,850.22, while the S&P CNX Nifty rose by 2.50 points or 0.05% to close at 5,415.35.