Markets likely to get a soft-to-cautious start of the new week

The Indian markets snapped the last session with cut of about half a percent as the global economic worries made the investors cautious for taking long bets. Today is the start of F&O expiry week and the trade is likely to remain volatile throughout the week. Also, there will be GDP data release on the final day that too will keep the market men cautious. Meanwhile, the traders will be eyeing the political development to take further cues, as the monsoon session of Parliament has stuck in a deadlock over the comptroller and auditor general’s report on alleged discrepancies in coal block allocations and traders are not expecting policy measures if the situation remains the same. The sentiments are also likely to be under pressure as the Reserve Bank of India has said that growth deceleration in Indian economy has been led primarily by a 46% dip in new investments in large projects. There is likely to be buzz in the steel companies as the WTO’s dispute settlement body is going to take up on August 31 India’s complaint against duties imposed by the US on imports of some Indian steel products. In April this year India had complained that the US had wrongly imposed countervailing duties on certain hot-rolled carbon steel flat products from India.

The US markets made a good bounce back on the last trading day of the week on the buzz about ECB considering setting targets in a new bond-buying program. The Asian markets have made a mixed start with many of the indices trading marginally in red, leading the pack is China, down by about a percent after a government report showed that Chinese industrial companies’ profits fell for a fourth month in July. Chinese Premier Wen Jiabao has urged extra measures to support exports and help meet economic targets.

Back home, pressurized by subdued global cues, domestic benchmarks snapped the day’s trade below their psychological 5,400 (Nifty) and 17,800 (Sensex) levels. Both the frontline indices traded choppy through the session, though they tried to make some recovery in the late morning session. However, the recovery proved short lived as key benchmark indices weakened on political concern after parliament deadlocked once again over the coal block issue, where BJP stuck to its stand of demanding resignation from Prime Minister Manmohan Singh, also prompted market-men to book their profits. Moreover, rupee dropped to 55.39/40 against its previous close of 55.26/27, after four sessions of gains, tracking a weaker global risk sentiment. The main pressure came in from rate sensitive counters like Banking, realty and consumer durables which remained the top laggards after Reserve Bank of India (RBI) poured cold water on the hopes of rate cuts in upcoming mid-quarterly monetary policy review, in its ‘Annual Report for 2011-12’, a review of the previous fiscal year's macroeconomic conditions and outlook for the current year, stated that ‘lower interest rates alone are unlikely to jump-start the investment cycle.’ Metal space also dampened the sentiments and declined over half a percent. Stocks like, Hindalco, Tata Steel, Jindal Steel edged lower after preliminary reading showed that China’s manufacturing may be contracting at a faster pace this month. China is the world’s largest consumer of copper and aluminum. HSBC said its preliminary or “flash” reading of its China manufacturing Purchasing Managers' Index (PMI) for August fell to a nine-month low of 47.8 on a 100-point scale, dropping from July's final print of 49.3. Back home, pressure also came in as shares of diesel car makers skidded after Minister of State for Petroleum and Natural Gas R.P.N. Singh stated that the Ministry of Petroleum & Natural Gas had wrote to the Ministry of Finance for levying additional excise duty on diesel cars. However, losses remained capped as some respite came from FMCG pack, which edged higher on reports of revival of monsoon rains this month. Finally, the BSE Sensex lost 67.01 points or 0.38% to settle at 17783.21, while the S&P CNX Nifty declined by 28.65 points or 0.53% to close at 5,386.70.