Markets likely to get a soft start on sluggish global cues

The Indian markets recovering in the second half managed a close of modest gains. There was lower level buying in the blue-chips that helped the markets recoup their early losses, while the ailing banking shares bounced back on hopes of capital infusion after RBI governor D Subbarao said that state-run banks need Rs 90000 crore to meet Basel-III norms. Today, the start is likely to remain cautious, as the global cues are not supportive, however the PSU oil marketing companies are likely to see some spurt on report that the prices of petrol, diesel and LPG may be increased next week after Finance Ministry told the Petroleum Ministry that it has no funds left to subsidise fuels. The revision could result in petrol turning costlier by Rs 4 a litre, diesel by Rs 5 and LPG by Rs 50 a cylinder. The infra stocks too will in lime light after the Finance minister P Chidambaram met with insurers to discuss steps to channelise their long-term savings into infrastructure sector. It has been estimated that India needs about a trillion-dollar investment in the infrastructure sector during the 12th Five-Year Plan. On the same time the retail stocks are likely to see some pressure, as the Government has ruled out easing sourcing norms and has said that companies have to procure 30 per cent of their merchandise requirement from domestic small industries. There will be lots of scrip specific movements too, to keep the markets buzzing.

The US markets made a soft-to-flat closing after a long weekend, while the Nasdaq managed to close in green Dow and S&P were down by less than half a percent, as the economic news remained weak and investors awaited new economic data and some development from the upcoming meeting of European Central Bank policymakers.  The Asian markets have once again made a weak start with all the indices trading in red and some of them even lower by over a percent on getting report of manufacturing contraction from US and slower growth in Australian economy.

Back home, Indian equity indices, after reeling under pressure in the first half, staged a spirited comeback in late trade snapping the session near intraday high buoyed by hopes of fuel price hike. Though, the bourses traded in the red terrain during first half of the session on concern that there will be a possible downgrade of India’s sovereign debt rating if the expected reforms do not come through in the next few days. But, sentiments took U-turn supported by PSU oil marketing companies, which gained strength as petroleum ministry plans to raise diesel rates by Rs 4-5 per litre after the parliament session ends on September 7, 2012 as oil firms’ revenue loss has soared to almost half the retail price. The companies like BPCL, HPCL and IOC all surged between 0.50-2.50 percent. Sentiments also got a booster as banking shares firmed up after global investment bank Goldman Sachs upgraded Indian banks to ‘neutral’ from ‘cautious’ citing favourable risk/reward in public sector bank stock prices, as the gap between state-owned and private banks widened to a 10-year high. The market sentiment also strengthened as investors started speculating that the government will kick-start the reform process in the face of a sharp slowdown in the Indian economy. The market continued to grab some support from news that a panel appointed by the government to review the proposed General Anti Avoidance Rules (GAAR) recommended in a report on September 1, 2012 that the government should abolish the tax on gains arising from transfer of listed securities, applicable to both residents as well as non-residents. The sentiments was pulled higher by metal stocks like Jindal Steel & Power, JSW Steel, Tata Steel, SAIL and Sterlite Industries, which edged higher as LMEX, a gauge of six metals traded on the London Metal Exchange gained 1.16% on September 3, 2012. Some strength also came in after media shares like Zee Entertainment Enterprises, Dish TV India, Wire & Wireless India and Sun TV Network surged on renewed buying ahead of the October 31, 2012 deadline for cable TV digitization in four metro cities of Delhi, Mumbai, Kolkata and Chennai. Finally, the BSE Sensex gained 56.47 points or 0.32% to settle at 17,440.87, while the S&P CNX Nifty rose by 20.25 points or 0.39% to close at 5,274.00.