Markets likely to get a cautious start; trade to remain range bound

The Indian markets despite a positive start could not keep their momentum going and lost their way in second half of trade to close flat in last session. Today, the start is likely to be cautious and the trade may remain range bound with buzz in political circle due to the talks of a no-confidence motion or a vote on the FDI issue in the forthcoming winter session of Parliament that begins on Thursday. There will be some action in the derivative’s segment too, as the market regulator Sebi in its bid to curb excessive speculation by small investors has banned trading in futures & options (F&O) contracts on both the BSE and NSE, which came with a minimum contract size of Rs 1 lakh and was popularly called mini-derivatives contracts.  On the segmental front, the ailing airlines sector is likely to remain under pressure as air travel has seen steepest slide of 16% year on year in October, despite being the holiday season. One overseas regulation too is likely to make its impact on the Indian markets. The Canadian Securities Administrators, the securities market regulator of Canada, has barred Indian asset management companies from selling investment products to local investors. The decision will have a significant impact on Indian fund houses, which raise a significant amount of investments from Indians settled in that country.

The US markets made a flat closing on Tuesday; the trade remained lackluster and came under pressure after Federal Reserve Chairman Ben Bernanke warned that the Fed does not have the tools to offset the negative impact of the US going over the fiscal cliff. The Asian markets have made mostly a green start, though the traders in the region are re-focusing on the US fiscal cliff.

Back home, Tuesday turned out to be a choppy session of trade for frontline barometer gauges, which witnessed consolidation for second consecutive session settling near their pre-close levels. Stock markets in India, after the gap up opening, held on to the initial momentum for morning trade but lost their direction soon after European market opening. The benchmark equity indices that were trading with over half a percent gain in mid morning trades could negotiate only a flat close in the absence of buying interest ahead of the winter session, which kick starts from November 22, where Mamata Banerjee led Trinamool Congress is likely to bring no confidence motion against the incumbent UPA. Supportive cues from US markets provided the much needed support to local markets in first half. However, disappointing cues from European market took their toll on domestic sentiments in second half and dragged the frontline gauges below the psychological 5,550 (Nifty) and 18,300 (Sensex) levels. Markets got some support in the initial trade with the statement of C Rangarajan, chairman of Prime Minister’s Economic Advisory Council that government will strive to rein in the fiscal deficit within the revised target of 5.3% of GDP for 2012. Gains of Auto stocks too cushioned sentiment. Stocks like M&M, Tata Motors and Maruti Suzuki all edged higher on hopes of higher sales this month on account of demand pick up during the festival season. However, sentiment took a hit after shares of gold finance companies, namely, Manappuram Finance and Muthoot Finance dipped on Tuesday after the Reserve Bank of India, in a bid to dissuade people from indulging in speculative activity, banned banks from advancing any loans to its customers for purchasing gold in any form, which includes primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold mutual funds. Even losses of pharmaceuticals stocks, namely Cipla, Ranbaxy Laboratories, added to pessimistic environment. EGoM on the proposed National Pharmaceutical Pricing Policy, headed by Agriculture Minister Sharad Pawar, will meet on Nov 21 to discuss concerns raised by the finance ministry. Finally, the BSE Sensex lost 9.68 points or 0.05% to settle at 18,329.32, while the S&P CNX Nifty rose by 0.15 points to end at 5,571.55.