Markets to get a gap-down start on weak global cues

The Indian markets despite a decent start turned choppy in the previous session and closed marginally lower. Today, the start is likely to be a gap-down one as the global cues have turned feeble and there is not much on domestic front to support the markets either. The high flying IT sector stocks are likely to come under pressure today, as not only the European crisis is not getting any early resolution but the number one Indian software exporter-TCS- has reported slightly lower than estimated numbers for the second quarter. The company reported a 14.7-percent rise in quarterly net profit. The rate sensitive sectors too are likely to remain in somber mood as the finance minister Pranab Mukherjee has said that Food security and volatility in commodity prices is a matter of concern for India and raising agricultural productivity is the only long term solution to tackle the twin problems. Also, the chief economic adviser to the finance ministry, Kaushik Basu has said that India's current inflation is partly driven by rising labour costs.

The US markets plunged on Monday, all the hopes of recovery in Europe were dashed by the German finance minister's comments and the equities sustained their worst loss in two weeks. There were some disappointing earnings announcements that too weighed on the markets. The Asian markets have made a weak start and most of the indices are trading lower by over one and half a percent in early trade. Report of Chinese economy growing at the slowest pace in two years was impacting the sentiments in the region.

Back home, Indian equity indices commenced the week on a sluggish note as the benchmarks showcased an unenthusiastic performance on Monday and settled with moderate cuts of around a quarter percent. Marketmen looked to consolidate their position in the session after rocketing around five percent in the week gone by and they largely indulged in stock specific activities amid the slew of earnings announcement for the quarter ended September, 2011. Despite an optimistic start, local equities failed to capitalize on the momentum as index heavyweight Reliance Industries proved the main culprit. RIL, with the highest weightage on Sensex, got bludgeoned by close to four percent in the session after investors punished the stock for announcing earnings with modest improvement. The early optimism also got petered out on reports that the German finance minister ruled out any final agreement on the European debt crisis at the EU summit on 23 October. Earlier on Dalal Street, the benchmark got off to a positive start after sentiments got buttressed by reports that G20 leaders hard-pressed Europe to take decisive action by the end of this week to bring the euro zone’s debt crisis under control and prevent the global economy tipping into recession. However, the indices drifted into the negative zone in mid morning trades and slipped to intraday lows in early noon session. However, the psychological 5,100 and 17,000 levels proved as strong support levels for the key gauges as the benchmarks soon recovered from the lows and oscillated in a narrow band but failed to claw back into the green by the end. Eventually the NSE’s 50-share broadly followed index Nifty, suffered a moderate cut of around a quarter percent to settle above the crucial 5,100 support level while Bombay Stock Exchange’s Sensitive Index-Sensex- slipped around sixty points and closed above the psychological 17,000 mark. Moreover, the broader markets managed to escape heavy losses and settled on a flat note, yet outperformed their larger peers. On the BSE sectoral space, the Oil and Gas pocket was the top laggard, languishing at the bottom of the table with 2.29% losses since index heavyweight Reliance Industries got lacerated by close to four percent. Also the Capital Goods counter bore the brunt of hefty selling pressure and plunged by over a percent. On the flipside, buying was evident in the rate sensitive Automobile and Bankex counters which climbed by 1.58% and 0.60% respectively, while the Consumer Durable index too went home with around one and half a percent gains. Finally, the BSE Sensex lost 57.60 points or 0.34% to settle at 17,025.09, while the S&P CNX Nifty declined by 14.05 points or 0.27% to close at 5,118.25.

The US markets plunged on Monday posting their worst session in two weeks, retreating from last week’s rise after Germany played down the idea of a quick fix for Europe and an index of regional manufacturing fell short. German finance minister and spokesman for Chancellor downplayed the plans to be released at the end of the weekend summit. Germany stated that European governments would not resolve the euro-zone debt crisis at the European Union meeting slated for October 23, with a spokesman for German Chancellor Angela Merkel stating the discussions would likely continue into 2012. Optimism that the region’s officials were developing a plan to help banks weather losses on sovereign debt propelled gains in markets.

Earlier, markets started to drift lower after the Federal Reserve Bank of New York’s index tracking factory activity in the Empire State region contracted for a fifth month in a row in October, although the gauge improved slightly from September. Separately, data from the Federal Reserve had US industrial production rising 0.2% in September on increased demand for computers and cars.

The Dow Jones industrial average lost 247.49 points, or 2.13 percent, to 11,397.00. The Standard and Poor’s 500 closed lower by 23.72 points, or 1.94 percent, to 1,200.86, while the Nasdaq composite lost 52.93 points, or 1.98 percent, to 2,614.92.

Crude prices got a halt to their rally mood and fell on Monday as investors got disappointed after German finance minister forecast that an EU summit this weekend would not present a definitive solution to the region's debt crisis, and consequently curbed investors' risk appetite. The rise in dollar against euro weighed on good economic report that industrial production rose and manufacturing in the state of New York rose slightly so far this month and restricted crude to rise.

The euro fell from a one-month high against the dollar as the German finance minister's comments sparked risk aversion.

Benchmark crude for November delivery settled at $86.38 a barrel, down 42 cents, or 0.48 percent, after trading in a range between $85.88 and $88.18 on the New York Mercantile Exchange. In London, Brent for December delivery settled at $110.16 a barrel, dropping $2.07, or 1.84 percent on ICE.