Markets to remain in a somber mood with a soft-to-cautious start

The Indian markets suffered sharp selling pressure in the second half of last session, traders overlooked the better than expected inflation numbers and the markets got hammered by the weak earnings numbers, marketmen were also worried that the Reserve Bank of India (RBI) would also factor in the persistent current account deficit into its monetary policy decisions. Today, the start is likely to remain cautious-to-soft lacking any supportive cues. Telecom sector will keep buzzing today, as the telecom firms have claimed that the government is overcharging them, after the Department of Telecommunications (DoT) sent notices to telecom operators seeking payment of dues on licence fees worth more than Rs 26,000 crore over the course of the last one month. In other development, Supreme Court has rejected the applications of four telecom companies to reconsider an earlier order cancelling their permits to provide telecommunications services. Markets will be reacting to the Sebi’s action of imposing a total penalty of Rs 30.75 crore on 118 entities, including the promoters of erstwhile Bank of Rajasthan (BoR), for manipulative practices in the stock market. There will be some earnings announcements too.

The US markets remained choppy and once again ended mixed on Thursday, global economic growth worries weighed on the good jobs data, jobless claims fell to 341,000, a decrease of 27,000 from the previous week's revised figure of 368,000. Though, news from merger-and-acquisition front helped limit the downside for the markets, after Berkshire Hathaway and 3G Capital agreed to acquire Heinz. The Asian markets have made mostly a soft start on some major earnings disappointments. Japanese market was down by about a percent as Russia's finance minister has said that Group of 20 nations should take a stronger stance against currency manipulation.

Back home, Thursday proved a big let-down for the markets despite the inflation figures slumping to three years low. The trade remained choppy and the traders remain concerned about the future outlook of the market as the near term trigger of inflation failed to provide any help. Markets got a flat but a positive start on supportive cues from the regional peers and the trade remained cautious ahead of the WPI inflation numbers. But the second half of trade dragged the markets below the crucial support levels of 5,900 (Nifty) and 19,500 (Sensex). The early green start of the European markets gave a sense of support to the domestic markets but latter decline kept the domestic market’s recovery in check. Back home, the markets could not capitalize the much awaited soothing report of a decline in headline inflation numbers for January.  The wholesale price index (WPI) inflation gauge, cooled down to more than three year low at 6.62% (Provisional) for the month of January, 2013 as compared to 7.18% for December and 7.23% during the corresponding month of the previous year. Build up inflation in the financial year so far too dropped significantly to 5.09% compared to a build-up of 6.15% in the corresponding period of the previous year. The markets got spooked by the sluggish Q3 performance of the largest PSU lender State Bank of India (SBI). The bank posted a 4 percent rise in quarterly net profit, its smallest increase in six quarters, the net profit of the bank was Rs 4648.44 crore compared to Rs 4318.08 crore in the same quarter last year. While the provisioning and NPAs of the bank increased, its net interest income declined during the quarter. The other earnings disappointment came in from Dr Reddy's Laboratories whose net dipped by 29% to Rs 363 crore for the third quarter ended December 31, 2012.  After the slump in the latter half of trade, markets showed little resistance lacking any supportive cues and slumped as selling intensified on concern of earnings disappointment, ending near the lowest point of the day. Broader indices were hit harder, losing over one and half a percent. On sectoral front Capital Goods was the major laggard, down by around two and half a percent, followed by Oil & Gas, Auto and Realty and Power. Finally, the BSE Sensex lost 110.90 points or 0.57% to settle at 19,497.18, while the S&P CNX Nifty declined by 36.00 points or 0.61% to end at 5,896.95.