Markets likely to get a flat start on the penultimate day of F&O expiry

The Indian markets remained range-bound though losing some steam in final hours and recovering simultaneously in last session. While political issues restricted traders from going long, banking stocks once again dragged the markets. Today, the start is likely to be flat-to-positive; however volatility may emerge in latter trade, being the penultimate day of series expiry. The rate sensitives’ are likely to remain under pressure as despite wide criticism RBI has reiterated that inflation remains too high and needs to fall further or risk more damage to the economy. The RBI governor, Subbarao added that he believes the central bank has been successful in easing price pressures by reducing the inflation rate to 7 percent from 11 percent but also pointed that various factors, including high commodity prices, the fiscal deficit and the monsoon is again pushing it higher. There is likely to be some buzz in India Inc, as Securities & Exchange Board of India has allowed the conversion of 25% of Indian depository receipts (IDRs) of a company into underlying overseas listed equity shares in any financial year. Power sector too will remain buzzing as the Power Ministry is holding a meeting today with the State Electricity Regulatory Commissions to look into the proposed amendment to the Electricity Act.

The US markets continued their wait and watch approach and made another mixed closing, with Nasdaq once again closing in green. Traders are waiting for a key speech by Federal Reserve Chairman Ben Bernanke later this week; however the economic news remained supportive as US single-family home prices gained for the fifth month in a row in June. The Asian markets have mostly made a positive start, though the gains are marginal as traders are waiting for some announcements by the ECB and Federal Reserve chief’s at Jackson Hole Symposium. Chinese market was trading lower on report that retailers in the country are reporting weaker sales growth.

Back home, Indian stock markets continued their southward journey and completed a hat-trick of negative closes ahead of the derivatives expiry later this week. The frontline equity indices traded in a narrow range for most part of morning trades but a sharp wave of selling pressure emerged in noon trades, which pushed the key gauges below their psychological 17,650 (Sensex) and 5,430 (Nifty) bastions. However, little support in the dying hour helped the market to close out of their lows. The sell-off in local markets appeared mainly after logjam in Parliament entered its sixth day today, as BJP stuck to its demand for the resignation of Prime Minister Manmohan Singh on the coal block allocation issue. In addition, delay in the major reform due to continuous impasse in the parliament also added to the bout of pessimism at Dalal Street. Continued worries about weakening economic growth at a time when parliament proceedings remain deadlocked, again dragged banking index lower in today’s trading session. Meanwhile, street is widely expecting India’s economy to have grown 5.3 percent in the April-June quarter, unchanged from January-March quarter. GDP data is due to be released on August 31, 2012. There is also pessimism that the central bank will hold on to key rates despite headline inflation falling below the 7 percent mark. Metal counter too led the downfall as the sector continued its south bound journey for yet another day and remained the top laggard, losing over two and half a percent on concerns that demand would be lower on the back of weakening economic scenario in China after government data showed that profits of major industrial enterprises declined by 5.4% in July. The main pressure came in from stocks belonging to companies, which were alleged to be involved in the list of coal scam disclosed by the Comptroller and Auditor General last week, namely, Jindal Steel, Sterlite Industries, Adani Enterprises, etc. In addition, the sentiment at Dalal Street also took a hit when the CAG reportedly pulled out state-owned Oil & Natural Gas Corporation (ONGC) for not placing desired emphasis on discovering oil and gas and being behind the schedule in monetizing its discoveries. However, the losses remain 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 47.10 points or 0.27% to settle at 17,631.71, while the S&P CNX Nifty declined by 15.65 points or 0.29% to close at 5,334.60.