Markets likely to get a mildly soft start; to take cues from European markets

The Indian markets consolidated in previous session after a huge rally, the uncertainty on the global front mainly weighed on the sentiments and some amount of volatility crept in, a day ahead of the F&O September series expiry. Rate sensitive and commodity stocks kept bleeding while the defensive sectors stood strong. Today, the start is likely to be soft-to-cautious and the trade is likely to remain volatile owing to the series expiry. However, traders will be eyeing the European markets and how they pan out, for further cues. The PSU oil companies are likely to recover with the slump in global crude prices, also it is reported that central government was in the process of reviewing the Petrochemical investment policy for promotion of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIR) to bring it in sync with the ground realities. However, retail companies are likely to remain in somber mood as Union food and consumer affairs minister KV Thomas has said that policy on foreign direct investment in multi-brand retail will take more time. Meanwhile, BSE on Wednesday got an approval to set up an exchange for small and medium enterprises (SMEs) from the capital markets regulator Securities and Exchange Board of India (Sebi).

The US markets got a halt to their three days winning streak after a very volatile trade, as sharp division appeared among European nations to tackle the debt situation. The commodity stocks once again remained under pressure on worries that slow growth would weaken demand for raw materials. The Asian markets have made a mixed start with some of the indices falling for the first time in three days, the dollar and yen have strengthened amid concern that European policy makers will struggle to stem the region’s debt crisis.

Back home, a session after showcasing a vivacious rally and amassing close to three percent, Indian equity indices faltered and failed to extend the winning momentum on the penultimate day of September series F&O expiry. Despite the sharp run-up on Tuesday, market participants did not seemed convinced with the relief rally as they believed that the gains in the session were only build on hopes of a resolution to lingering Euro-zone debt problem but the outlook still remains cloudy as nothing has changed on the horizon as yet. The sanguinity over Europe's efforts to resolve its sovereign debt problem petered out after a report indicated that France’s economic growth stalled last quarter, stoking concerns that Europe’s debt crisis is dampening growth in the nation. The local benchmarks failed to claw back into the green due to the lack of conviction amongst investors as no concrete evidence of a strategy to tackle the Euro-zone crisis and mixed economic reports from US kept them on the sidelines while market participants also looked ahead to a key vote in Germany scheduled on Thursday, where leaders will decide on expanding a rescue fund for debt-mired European countries. Earlier on Dalal Street, the benchmark got off to a positive opening as the indices sailed past the psychological 5,000 and 16,650 levels in the early trade since investors largely remained influenced by the cautiously optimistic sentiments prevailing in Asian markets. Thereafter, the key indices failed to show any kind of eagerness to regain those levels as they oscillated around the neutral line for most part of morning trades and drifted deeper into the red terrain in late morning session. The indices tried hard to claw back into the green terrain in noon trades but profit booking at higher levels brought the benchmark gauges to lowest levels in the session. Finally some short covering in the dying hours of trade ensured that the bourses snap the session with moderate cuts. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of half a percent to settle below the crucial 4,950 support level while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by about eighty points and closed below the psychological 16,450 mark. Moreover, the broader markets too failed to show any kind of fervor and plunged by close to a percent, underperforming their larger peers by quite a margin. On the BSE sectoral space, the Capital Goods pocket finished at the top laggard in the space, registering large cuts of over two percent as heavyweights like L&T and Siemens plummeted. On the flipside, defensive FMCG and Healthcare stocks hogged the limelight as they settled with good gains while the information technology counter too witnessed hefty buying interests. Finally, the BSE Sensex lost 78.01 points or 0.47% to settle at 16,446.02, while the S&P CNX Nifty declined by 25.35 points or 0.51% to close at 4,945.90.

The US markets tumbled on Wednesday, halting a three-day winning streak, on heightened concern that European leaders have conflicting views on resolving the euro-zone’s debt crisis.  German Chancellor Angela Merkel stated that she is waiting to hear from the European Union, the European Central Bank and the International Monetary Fund about Greece’s austerity moves before deciding whether changes are needed to a financial aid plan brokered in July. However, US stocks gained earlier after a bigger-than-forecast increase in demand for capital goods easing concern that the economy was slipping back into a recession though orders for durable goods fell slightly in August.

Besides, auditors from the EU, ECB and IMF were on their way to Greece to examine austerity moves designed to ensure Athens receives its next installment of aid. At the same time, reports emerged that euro-zone members were diverging on terms of the already agreed, July deal. Germany is scheduled to vote on expanding Europe’s rescue fund, the European Financial Stability Facility tomorrow. Meanwhile, the European Union proposed a financial-transaction tax to take effect in 2014 and Spain and Italy extended temporary bans on short selling of financial shares. Finland’s parliament approved the expansion of Europe’s temporary rescue fund, bringing to nine the number of euro members to have ratified the mechanism.

The Dow Jones industrial average lost 179.79 points, or 1.61 percent, to 11,010.90. The Standard and Poor's 500 closed lower by 24.32 points, or 2.07 percent, to 1,151.06, while the Nasdaq composite lost 55.25 points, or 2.17 percent, to 2,491.58.

Crude prices fell on Wednesday after a more than $4 rally in the previous session, reversing almost all their gains, as investor concerns about Europe's attempts to solve its sovereign debt problems weighed on the sentiments, pulling down the prices. There were some weak economic reports too that pressured the crude, new orders for US durable manufactured goods slipped in August on weak demand for motor vehicles.

Benchmark crude for November delivery fell $3.24, nearly 4 percent, to end the day at $81.21 per barrel, after trading in a range from $81.06 to $84.62 on the New York Mercantile Exchange. In London, Brent crude for November lost $3.33, or 3.1 percent, to finish at $103.81 per barrel on the ICE.