Markets to get a cautious start lacking any supportive cues

The Indian markets lost their way in last session, closing near the lowest point of the day. There were slew of negative news that impacted the sentiments of the market, while the manufacturing activity eased to its lowest level since November on the back of weak external demand, giving more proof that all is not well with the Indian economy exports in July contracted by 14.8%, the steepest fall in three years. Today, the start is likely to be flat and the export oriented companies may remain under pressure, however some recovery can be expected later in the day and the markets may take guidance from the European market movements. The metal and mining stocks that slumped in last session on opposition’s demand of cancelling all coal blocks having mention in CAG report, may get some respite as the Government has rejected the demand for immediate cancellation of 142 coal block allocations. The PSU oil marketing companies (OMCs) are likely to remain under pressure as the international crude prices continue to move up and it has been reported that OMCs losses have mounted to around Rs 560 crore a day on subsidised fuels. There is likely to be buzz in India Inc, as the Finance Ministry is keen to ensure that all sectors of industry pay tax at an effective rate of at least 24 per cent or more.

The US markets remained closed on Monday unable to give any cue to the other global markets. The Asian markets have once again made a mixed start and some of the indices that are trading in green are only marginally higher from their previous close. There is cautiousness in the global equity markets as the European Union’s outlook was cut by Moody’s Investors Service ahead of meetings of the region’s policy makers.

Back home, Indian key benchmarks, after a firm opening, snapped the day’s trade slightly lower as General Anti Avoidance Rules (GAAR) deferral hopes were offset by subdued manufacturing growth of India, which eased to a nine-month low to 52.8 in August, 2012. Manufacturing accounts for a little over 15 percent of India’s gross domestic product (GDP) and has been the biggest drag on growth. Poor showing by the manufacturing sector pulled down the GDP growth to 5.5% in the first quarter, the decade’s worst Q1 performance, against the growth figure of 8% in the corresponding period in the last fiscal. The sentiments also remained lethargic after India’s exports slumped 14.8 percent to $22.44 billion in July as compared to $26.34 billion recorded during the corresponding month in 2011 due to lower demands in North America and Europe. Meanwhile, imports dropped 7.61 percent to $37.93 billion in July, leaving a monthly trade deficit of $15.49 billion. The selling pressure intensified after Morgan Stanley today lowered India’s growth forecast to 5.1% for the current fiscal, from its earlier estimate of 5.8%. The disruption of parliament continued for the ninth consecutive session by the opposition party BJP over CAG report on coal allocation also hurt the sentiments. The mood also remained dampen as PSU oil marketing companies extended their recent losses triggered by concerns about high under-recovery. PSU OMCs incurred under-recovery of Rs 47,811 crore in Q1 June 2012. Stocks like HPCL and IOC edged lower in the trade. Some amount of pressure also came in from Aviation sector where stocks like Spice Jet and Jet Air India tumbled over 4 percent after fuel or Aviation Turbine Fuel (ATF) prices were hiked by a steep 7.6 per cent or by Rs 5,146.16 per kilolitre (kl), the biggest hike ever that took ATF price to all-time high of Rs 72,282 per kilolitre, with effect from August 31 midnight. However, the losses remain capped as some respite was provided by Auto space, which gained about half a percent after companies like M&M and Tata Motors reported decent August sales figure. Tata Motors registered a 12% growth in its total sales at 71,826 vehicles for the month of August 2012, including exports of Tata commercial and passenger vehicles while, M&M reported 21.74% jump in sales at 45,836 units for August against 37,684 units in the same month last year. The BSE Sensex lost 45.16 points or 0.26% to settle at 17,384.40, while the S&P CNX Nifty declined by 4.75 points or 0.09% to close at 5,253.75.