Markets likely to extend sluggishness; to get a gap-down start

The Indian equity markets suffered sharp cuts in last session tailing their global peers and snapped one of the worst quarter since 2008. Today, the mood is not looking different and the markets are likely to get a gap-down start, the metal and mining companies would continue to remain under pressure due to global weakness and some local issues. Textile stocks too are likely to remain under pressure as US Department of Commerce, Office of Textiles and Apparel (OTEXA) in its latest report has stated that India, once a leader in textile export is now lagging behind Bangladesh, China and Vietnam. However, ADAG companies are likely to get some relief as the CBI, probing the 2G scam had said that it has no evidence of RADAG Chairman Anil Ambani’s direct involvement in the structuring of different companies and transfer of funds relating to Swan Telecom. 'The investigation did not reveal any evidence either oral or documentary to inculpate Anil Ambani in the structuring of different companies and transfer of funds,' the agency said in its status report submitted to the Supreme Court on September 29. Also, the auto stocks will be buzzing as most Indian auto makers posted higher sales in September.The anticipated demand spurt in the festive season encouraged most of them to ship more vehicles to dealers. Though, Maruti Suzuki India, posted a decline for the third straight month on production cuts and lower demand. The company lost production of 800 cars a day on an average last month due to labor unrest at Manesar, which finally ended on Friday

The US markets slumped on Friday on concern of global economic recovery and despite some good economic reports. The US economy expanded at an annual rate of 1.3 percent in the second quarter, compared with an earlier estimate of 1 percent. Consumer spending too increased but the investors remained concerned about the developments in Europe and its impact on the global economy. The Asian markets have made a dismal start and some of the indices are even down by over 3 percent as the oil and metal stocks have declined sharply. The Chinese markets are shut, though there is signs of stability in its manufacturing industry in September and it may ease concern that the world’s second-largest economy will suffer a slump in economic expansion that escalates the risk of another global recession.

Back home, Indian equity indices went on to undo all the good work done in the September F&O expiry session as they shaved off about one and half a percent and drifted below the psychological 16,500 (Sensex) and 4,950 (Nifty) levels on Friday. Furthermore, the frontline indices even got obliterated by 12.8% for the quarter ended September 30, 2011, the biggest quarterly decline since the 25% plunge in the October-December quarter of 2008 amid the global financial crisis and their third straight quarterly decline. The domestic bourses were once again tormented by global developments on the last trading session of the week as investors fretted over global economic growth prospects which prompted them to take profits off the table amid little signs of recovery. The better than expected US GDP data which showed that the economy grew at a 1.3% pace in the Q2 along with the upbeat US Jobs data failed to bolster local sentiments. In addition, Chinese PMI data indicated that the factory sector contracted slightly for a third consecutive month in September while German retail sales declined the most in more than four years in August, stoking concern that the global economy is heading for another recession. Earlier on Dalal Street, the benchmark got off to a negative opening as the indices breached the psychological 5,000 and 16,600 levels in the early moments of trade since investors largely remained influenced by the cautiously pessimistic sentiments prevailing in Asian markets. Thereafter, the key indices showed some fervor and clawed back into the green terrain in morning trades. However, indices suffered a setback in afternoon trade as sudden bouts of profit booking emerged in the local markets after a somber European market opening, post which the indices could not stage any kind of recovery. Eventually the bourses pared almost all the gains garnered in the previous session and settled around the low point of the day. On the BSE sectoral space, Metal pocket remained top laggards in the space with over two and half a percent cuts as reports that Cabinet approved the new mining bill that weighed on sentiments. While rate sensitive sectors like Realty, Bankex and Auto too bore the brunt of hefty selling pressure and sank by close to two percent each. On the flipside, the Consumer durable counter was the only index which bucked the somber trend prevailing in the space and climbed by a percent. Finally, the BSE Sensex plunged by 244.31 points or 1.46% to settle at 16,453.76, while the S&P CNX Nifty shaved off 72.20 points or 1.44% to close at 4,943.25.