Markets likely to get a weak start tailing sluggish global cues

The Indian markets suffered severe plunge in last session, one of the steepest fall in last two years. The global concern spooked the markets and there was across the board panic selling. Today, the start is likely to remain somber with indices making a weak start in tandem with the other global markets, commodities and banking stocks are likely to remain under pressure on European concern, LMEX, a gauge of six metals traded on the London Metal Exchange , closed at a 10-month low. On the other hand the PSU oil companies are likely to get a good boost with the sharp fall in the international crude prices. Some consolidation and marginal recovery can be expected in the latter part of the day and traders might go for some short covering. Meanwhile, India’s monsoon rains have been reported to be 29 percent above normal in the week to Sept. 21, strengthening from 1 percent above average in the previous week. The Finance Minister has said that a good monsoon could ensure agricultural growth of about “4 per cent-plus” and growth in the manufacturing and services sector “clearly indicates that it will be possible for us to have the growth at 8 per cent for this year”. The rupee too has been weakening on global concern and weakened to it’s over two year low, depreciating 9.8 per cent in the last six weeks. The development helps exporters make more money from their overseas proceeds and hence some spurt after market stabilization can be seen in export oriented companies.

The US markets continued their plunge for yet another day with major indices deposing more than three percent on Thursday. There was panic selling across globe on fear of a new global recession. The Asian markets have made a weak start and the most of the indices in the region are extending their fall by 2-4 percent. Chinese market is down by around 3 percent after a report that factory output in the world’s second largest economy, slowed for the third month in a row. The euro currency project is in danger due to member states' runaway spending and the resulting sovereign debt crisis, a European Central Bank study warned on Thursday amid mounting global calls on Europe to take more decisive action.

Back home, Thursday’s session turned out to be a horrendous session for the Indian benchmarks which disintegrated like a ‘house of cards’ and went on to breach various key technical levels in the over four percent freefall. The frontline indices which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the journey only halted with the session’s close. The discouraging outcome of US Federal Reserve’s two-day policy meeting spooked sentiments as it prompted hefty bouts of profit booking across all counters. Apart from Fed’s dramatic $2.65 trillion securities portfolio recast plan, its warning that more downside risks are possible to the world’s largest economy and the downgrade of three US banks by Moody’s, hurt sentiments globally. Reports also indicated that European services and manufacturing growth contracted for the first time in more than two years in September. Earlier on Dalal Street, the benchmark got off to a gap down opening, in tandem with the somber sentiments prevailing in Asian markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The steep fall turned even acute after the opening of European markets in the noon trades, as one negative report after another from the continent kept creating havoc for the local bourses. The indices barely managed to show signs of stabilizing in the session as the downward drift halted only with the session’s close after suffering gargantuan losses. Finally the NSE’s 50-share broadly followed index Nifty, suffered a nasty two hundred point laceration to settle below the crucial 4,950 support level while Bombay Stock Exchange’s Sensitive Index Sensex got obliterated by over seven hundred points and closed just above the psychological 16,350 mark. Moreover, the broader markets too failed to show any kind of fervor and settled with large cuts of over three percent. On the sectoral front, the rate sensitive sectors like Realty, Automobile and Banking witnessed brutal assaults. Finally, the BSE Sensex shaved off 704.00 points or 4.13% to settle at 16,361.15, while the S&P CNX Nifty plunged by 209.60 points or 4.08% to close at 4,923.65.

The US markets suffered a sharp plunge on Thursday, extending losses for the second day in a row with the major indices taking their hardest single-day hit in five weeks, amid widespread selling of stocks and commodities on escalated fears about the global economy. Investors’ reaction to the Federal Reserve’s statement late Wednesday continued. The central bank warned of risks to the economic outlook and unveiled a bond-swap program, seen as something that would have minimal sway in revitalizing growth. Also, HSBC’s preliminary China Manufacturing Purchasing Managers’ Index fell to a two-month low in September, signaling a broad slowdown in China’s economy.

Though, US equities remained lower despite a Conference Board report that showed the index of US leading indicators increased more than forecast in August, pointing to a faster pace of growth heading into next year. Also the applications for jobless benefits fell 9,000 in the week ended September 17 to 423,000, the Labor Department stated.

The Dow Jones industrial average lost 391.01 points, or 3.51 percent, to 10,733.80. The Standard and Poor's 500 closed lower by 37.20 points, or 3.19 percent, to 1,129.56, while the Nasdaq composite lost 82.52 points, or 3.25 percent, to 2,455.67.

Crude prices slumped in tandem with the global equities and fell more than 6 percent on Thursday as traders rushed out of risk-based assets after the Federal Reserve’s stimulus effort and its dour economic outlook. The weak economic signals added to the increasing concerns about slowing economic growth, weak manufacturing indicators from China raised the concern of economic growth its effect on demand for oil.

HSBC's China Flash Purchasing Managers' Index, designed to give an early snapshot of the month's factory activity, dipped to 49.4 from August's final figure of 49.9. A reading below 50 indicates contraction. Also, there were reports that showed the euro zone's private sector contracted this month for the first time in two years.

Benchmark crude for November fell $5.41, or 6.3 percent, to settle at $80.51 a barrel, after trading in a range from $79.66 to $85 on the New York Mercantile Exchange. In London, Brent crude for November delivery settled down $4.87, or 4.4%, at $105.49 a barrel on the ICE.