Markets likely to get a mildly soft start tailing global peers

The Indian markets after a very volatile session and after breaching their crucial levels closed with modest losses in last session, though banking stocks performed well but all other sectoral gauges lost momentum by the end. Today, the start is likely to be soft-to-cautious and the traders will be eyeing the WPI monthly inflation data for further direction. Inflation continues to remain close to double digits despite RBI's 12 policy rates hike in last 18 months. Street is expecting only slight moderation in September inflation numbers from 9.78 percent in August. However, the Reserve Bank of India (RBI) Governor D Subbarao ahead of the monetary policy review scheduled on October 25, has again signaled it will maintain its anti-inflationary stance unless inflation eases. Inflation has a negative effect on growth when the wholesale price index (WPI) based inflation goes beyond the 5.5 per cent threshold, according to a Reserve Bank of India working paper. RBI revised the baseline projection for WPI inflation for March 2012 upward to 7% in July from 6%. The banking sector stocks are likely to keep their spirit high as the government approved the introduction of a bill in the winter session of parliament, which will help banks improve their debt recovery process and enhance credit to both corporate and retail customers.  The cable TV related stocks too are likely to add gains with the approval of ordinance on digitisation of cable network, in a move that could boost prospects for cable television service providers and broadcasters. There will be some result announcements too, to keep the markets buzzing.

The US markets clawed back and closed with modest losses on Thursday, the weak earnings report from JP Morgan along with slowdown worries from China made the investors cautious. Also, the new claims for unemployment benefits for the week remained flat signaling stagnation in the labor market. The Asian markets have made a weak start on concerns of narrowing trade surplus in China and credit-rating downgrades of Spain and European banks.

Back home, a day after showcasing a stupendous two and half a percent rally, Indian benchmarks indices took a breather on Thursday and snapped a volatile session on a pessimistic note with about half a percent cuts. Market participants lacked conviction to open fresh positions in the session and continued to remain on the sidelines ahead of Friday's WPI inflation numbers which will be the main determinant of RBI’s policy action in its upcoming policy review, as the central bank continues to focus on inflation amid signs of slowdown in consumption and production indicators. However, the rate sensitive counters like Banking and Realty witnessed good amount of buying momentum after government released the weekly inflation data which indicated that food inflation for week ended October 1 moderated to 9.32% against 9.41% wow. Meanwhile, cabinet gave its nod to the policy for acquisition of raw material assets abroad by central PSUs with a 3-year profit record. The new policy will pave the way for Navratna firms to invest up to Rs 3,000 crore in such assets without government approval, as against the present limit of Rs 1,000 core while it will allow Maharatna firms to invest upto the limit of Rs 5,000 core. Moreover, shares from the cable and satellite television industry got filliped after the CCEA cleared the ordinance to amend Section 4A of the Cable TV, bringing digitization into TV broadcast. Earlier on Dalal Street, the benchmark got off to a positive start, as investors’ risk appetite got a boost after European Commission President announced a broad new plan for recapitalizing the European banks, buttressing hopes that the region’s debt problems will be resolved soon. But the optimism soon tapered after the key gauges hit intraday highs and slipped into the red terrain. The frontline indices though gathered some momentum in early afternoon trades after reports that weekly inflation numbers moderated in the passing week. A technical bounce around the psychological 5,100 and 17,000 levels was evident in afternoon trades but investors took the opportunity to take profits off the table which dragged the indices back into the red terrain by the end of trade. On the BSE sectoral space, the rate sensitive Auto pocket was the top laggard in the space, languishing at the bottom of the table with 1.48% losses. Also the capital goods and the defensive Healthcare indices bore the brunt of hefty selling pressure and plunged by around a percent, while the Information technology index too went home with over half a percent gains. Finally, the BSE Sensex lost 74.47 points or 0.44% to settle at 16,883.92, while the S&P CNX Nifty declined by 21.55 points or 0.42% to close at 5,077.85.

The US markets closed lower on Thursday, with S&P 500 retreating after a three sessions rise, on disappointing earnings from JP Morgan Chase and after Spain had its long-term sovereign-debt rating cut. S&P lowered Spain’s rating to AA- from AA with negative outlook. Also, UBS AG, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc had long-term issuer default grades cut by Fitch Ratings, which put more than a dozen other lenders on watch negative as part of a global review. The market mainly edged lower after JP Morgan reported that its net income fell in the third quarter, depressed by lower investment-bank fees. Also, China’s customs bureau reported exports climbed a less-than-expected 17.1% last month from the year-ago period, while Beijing’s trade surplus totaled $14.51 billion, the smallest since May.

However, markets recovered from session lows after Slovakia’s parliament voted to approve an expanded Europe bailout fund. Slovakia is the last of 17 nations needed to give the green light to a more-powerful European Financial Stability Facility. Lawmakers voted 114 to 30 with three abstentions to support the European Financial Stability Facility in the second attempt this week after parliament failed to approve the measures on Oct. 11.

Besides, US economic data had the government’s count of Americans filing claims for jobless benefits last week declining by 1,000 to 404,000 and the US trade deficit little changed at $45.6 billion in August.

The Dow Jones industrial average lost 40.72 points, or 0.35 percent, to 11,478.10. The Standard and Poor’s 500 closed lower by 3.59 points, or 0.30 percent, to 1,203.66, while the Nasdaq composite gained 15.51 points, or 0.60 percent, to 2,620.24.

Crude prices extended their decline on Thursday on reports of rising crude stock piles coupled with depressing economic news from second largest consumer China. US Energy Information Administration (EIA) reported that crude stockpiles rose more than expected last week as imports rose, while refined product inventories fell more than expected as refinery capacity utilization eased. As per EIA, Commercial crude stockpiles rose 1.34 million barrels, while distillate stocks fell 2.93 million barrels and gasoline inventories fell 4.13 million barrels.

Meanwhile, China's trade surplus narrowed for a second straight month in September to $14.5 billion, with both imports and exports lower than expected. Its daily crude oil imports fell 12 percent in September from last year's record high.

Benchmark crude for November delivery fell $1.34 to settle at $84.23 a barrel, after trading in a range from $83.17 to $85.39 on the New York Mercantile Exchange. In London, Brent crude Futures ended down by 25 cents, or 0.2%, at $111.11 a barrel on the ICE.