Gap-down start on cards tailing plunge in global peers

The Indian markets consolidated in the previous session, eyeing the Fed’s decision, concern about weakening global economy too weighed on the sentiments. Today, the start is likely to be soft and the indices may get a gap-down start as the “operation twist” of Fed failed to stir any optimism in global investors’ mood. Meanwhile the markets are likely to be buzzing with SEBI’s latest crack-down as it has banned five FIIs, five broking houses, six companies and several other related entities from the market for their role in stock price manipulation using the GDR route. The market regulator also ordered Asahi Infrastructure & Projects, IKF Technologies, Avon Corp, K Sera Sera, CAT Technologies, Maars Software International and Cals Refineries, all listed companies, not to make any fresh issue of shares or instruments linked to shares till further order. While, the PSU oil companies are likely to soothe a bit with the declining crude oil prices, the battering IT stocks are likely to get some support with NASSCOM report that domestic cloud services market will touch $18b by 2020 of which two-third will be new business. However, there is a good news, advance tax payments from India’s top 100 companies have risen 9.9 percent on year at Rs 31707 crore in the July-September quarter from the year ago period. Total advance tax figures for the April-September period now stand at Rs 93000 crore, an increase of 9.4 percent from the year ago period.

The US markets tumbled on Wednesday after the much awaited Fed stimulus; the Fed said it will sell $400 billion worth of short-term securities to buy longer-term securities, in a move that could ultimately reduce rates on mortgages and other consumer and business loans. Though, the central bank reiterated to keep the interest rates zero but losses accelerated as it added that while it expects some pickup in the pace of the recovery in coming quarters, growth remains slow amid continuing weakness in labour markets. The Asian markets have made a weak start and some of the indices are down by 2-3 percent in the early trade.

Back home, it turned out to be a lackadaisical performance from the benchmark indices on Wednesday as they failed to snap the session in the green territory and settled marginally below the neutral line. The frontline gauges took a breather, a session after showcasing a scintillating performance as investors chose to remain on the sidelines ahead of the US Federal Reserve's monetary policy meeting outcome. Meanwhile, the IMF scaled down India’s economic growth for the calendar year 2011 and 2012. It expects India to grow by 7.8% in 2011 against the earlier estimates of 8.2%, and 7.5% in 2012 besides the earlier estimate of 7.8%. Local sentiments were also hurt by PMEAC chairman C Rangarajan’s expectations that inflation may stay at current elevated level for coming three months and the RBI’s stance on inflation depends on the inflation scenario in the coming three weeks. Earlier on Dalal Street, the benchmark got off to a positive opening, in tandem with the cautiously optimistic sentiments prevailing in Asian markets. The frontline indices soon gathered momentum and touched intraday highs in early hours but the optimism fizzled out sooner and the indices sea-sawed around the neutral line though the morning session. But fresh bouts of selling pressure surfaced after weak European opening post which the indices found it hard to claw back into the green terrain and eventually settled in the negative zone. Finally the NSE’s 50-share broadly followed index Nifty, registered single digit losses to settle below the crucial 5,150 support level while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by less than fifty points and closed above the psychological 17,050 mark. Moreover, the broader markets showed some resilience and settled on a positive note, outperforming their larger peers by quite a margin. On the BSE sectoral space, the Oil & Gas counter did the maximum damage as it slumped by over a percent after heavyweight Reliance Industries plummeted by over one and half a percent on reports that the CBI is set to file a case against the Mukesh Ambani-led RIL over inflation of costs. Profit booking was also evident in Automobile, Metal, IT and FMCG counters. On the flipside, the rate sensitive counters like Banking and Real Estate tried hard to prevent the benchmarks from drifting deeper into the red terrain by amassing about a percent of gain each while sectors like PSU and Power too witnessed some buying interests in the session. Finally, the BSE Sensex lost 34.13 points or 0.20% to settle at 17,065.15, while the S&P CNX Nifty declined by 6.95 points or 0.14% to close at 5,133.25.

The US markets suffered a sharp plunge on Wednesday, after the Federal Reserve moved to lower interest rates on consumer loans with a $400 billion debt-swap program that was widely expected. Fed stated that strains in global financial markets were among risks to the economic outlook. Also, a downgrade of several Italian bank ratings by Standard & Poor’s kept alive investor concerns over Europe’s sovereign-debt situation. Early in the session, stock indices briefly added some gains after an industry report illustrated a surge in existing-home sales, with the National Association of Realtors reporting a 7.7% rise in August.

Fed policy makers stated that they would replace short-term debt in the central bank’s portfolio with longer-term Treasury bonds in a bid to further cut borrowing costs. The central bank, also reiterated to keep rates at historic lows near 0% through mid-2013, and stated that it was acting in view of significant downside risks to the economic outlook, including strains in global financial markets. The Fed also would reinvest principal payments from its holdings of mortgage-related securities, a move designed to help mortgage markets.

The Dow Jones industrial average lost 283.82 points, or 2.49 percent, to 11,124.80. The Standard and Poor's 500 closed lower by 35.33 points, or 2.94 percent, to 1,166.76, while the Nasdaq composite lost 52.05 points, or 2.01 percent, to 2,538.19.

Crude prices resumed their declining trend on Wednesday after the Federal Reserve announced plans to boost the US economy by purchasing longer-dated government debt by selling $400 billion worth of short-term securities. The dollar strengthened on the news and the stock markets plunged, suffering their worst one-day drop in a month, along with Warning of “significant” downside economic risks weighed on the crude prices.

Meanwhile, the Energy Information Administration's (EIA) in its oil inventory report for the week ended September 16 showed that crude stocks declined 7.3 million barrels while, gasoline stocks rose 3.3 million barrels, and distillate stocks declined 0.9 million barrels.

Benchmark crude for November delivery settled down $1, or 1.15%, at $85.92 after trading in a range between $85.05 and $87.99 on the New York Mercantile Exchange. In London, Brent crude for November delivery settled down 18 cents, or 0.16%, at $110.36 a barrel on the ICE.