Markets likely to make a soft start tailing weak global cues

The Indian markets made a marvelous bounce back in last session, broad based buying was witnessed for the day that lifted the benchmarks above the coveted psychological levels. All the beaten down sectors performed well for the day with rate sensitive’s actively taking part. Today, the start of the markets are likely to be mildly soft and the trade may remain range bound on weak global cues, though the marketmen already seem to have factored in the 25 basis points hike by RBI but will closely watch the weekly inflation numbers. The mood is likely to remain subdued as the Finance Minister Pranab Mukherjee has said that India’s growth will fall below 8 percent and also that the government was unlikely to meet the 4.6 percent fiscal deficit target during the current financial year because of high commodity prices and turbulence in US and European economies. However, the PSU oil companies might continue their upmove and the telecom companies too may remain in jubilant mood with collective addition of 6.5 mn subscribers in September.

While, different important result announcements will keep the markets buzzing. Bajaj Auto, Bajaj Holdings, Exide Inds, Ultratech Cem, Thermax, Piramal Health and Hexaware Tech are among many to be announcing their numbers today.

There is one new listing on the bourses, transformer manufacturer, M and B Switchgears is going to list its shares on the stock exchanges. The company has fixed issue price at Rs 186, the higher end of the price band of Rs 180-186. The issue was subscribed 1.41 times. The company is engaged in manufacturing of power transformers, distribution transformers, furnace transformers and special purpose transformers. The company proposes to use the net proceeds of the issue to part-finance its project of setting up a new grid connected 4 MWp solar photovoltaic power plant at Gagorni in Rajgarh district of Madhya Pradesh.

The US markets are showing one day on and one day off trade, and Wednesday was the off day for the markets as they declined again with major indices losing considerably. The European leaders are meeting this weekend to find a solution to the region’s debt troubles; the conflicting statements of the leaders have confused the investors that there will be a permanent solution to the issue. Also Apple Inc. reported an income and revenue that fell short of expectations and weighed on the sentiments. The Asian markets have made a weak start with some of the indices witnessing cut of over one percent in early trade.

Back home, Indian frontline equity indices staged a smart bounce back a session after being pulverized by around one and half a percent, on the back of rebound in investors’ risk appetite across the globe amid renewed hopes that European debt trouble may be resolved soon. Domestic investors build hefty positions across the counters in Wednesday’s session as sentiments got buttressed after news reports that France and Germany have reached an agreement to boost the EFSF to 2 trillion euro as part of a comprehensive plan to resolve the regions’ sovereign debt crisis, which this weekend's summit should endorse. On the domestic front, better than expected earnings announcement by India’s largest motorcycle maker Hero Motocorp, and one of the top three lenders HDFC Bank further fortified domestic sentiments indicating that the outlook for domestic companies are not as bad as initially feared. Index heavyweights like Reliance Industries and L&T too rallied in the session by 2.72% and 3.74% respectively, and filliped the benchmarks to higher levels. Meanwhile, Indian finance minister, Pranab Mukherjee opined that the spate of scams unearthed within the country in the recent years had not affected investment climate here while the uncertainty in the external economic environment has played a part in affecting the investment climate. Earlier on Dalal Street, the benchmark got off to a promising start after investors largely remained influenced by encouraging global developments and rally on Wall Street after banks there announced encouraging earnings. After the sanguine opening there was no turning back for the frontline indices as they vivaciously rallied with great enthusiasm to tread to higher levels amid supporting global cues. The markets got underpinned further in the dying hours of trade and the northbound journey only halted with the session’s close. On the BSE sectoral space, the beaten down rate sensitive counters like Real Estate, Banking and Automobile counters witnessed hefty buying interests as marketmen covered the short positions that got build since the start of the week after encouraging quarterly earnings announcement. The capital goods pocket too gained a lot of traction in the session after bellwether L&T spurted by close to four percent. Meanwhile shares of sugar companies like Balrampur Chini, Dwarikesh Sugar, Rajshree Sugars etc enthusiastically rallied after reports that the governmant, the world’s second biggest producer of sugar after Brazil, may allow exports of the sweetener on a monthly basis. Finally, the BSE Sensex jumped 337.05 points or 2.01% to settle at 17,085.34, while the S&P CNX Nifty climbed 101.65 points or 2.02% to close at 5,139.15.

The US markets slumped on Wednesday, as a split emerged between France and Germany on ways to boost the European bailout fund, while the Federal Reserve stated companies grew more pessimistic about the economy. The markets traded higher before the Federal Reserve’s afternoon release of regional indicators, known as the Beige Book report, used to help measure the strength of the economy. The report stated that the US economy continues on about the same modest pace reported two months ago. The report also stated that many districts reported modest or slight growth with a weaker or less certain outlook from many contacts. Besides, there were some mixed economic data, Home starts soared 15% in September and home mortgage applications declined last week, while the consumer price index increased at a slower pace in September.

The sentiments of the markets were dampened as France and Germany disagreed on the role of the European Central Bank in leveraging the rescue fund and banks lobbied against forced recapitalizations and larger write downs of Greek debt. French President Nicolas Sarkozy flew to Germany to join the talks as European leaders assembled in Frankfurt in an effort to narrow divisions before an October 23 summit.

Also, Apple a significant component of the Nasdaq, had its worst session since December 2008 after the consumer-electronics maker reported earnings that fell short of analysts’ estimates because of a surprise drop in iPhone sales from the June quarter.

The Dow Jones industrial average lost 72.43 points, or 0.63 percent, to 11,504.60. The Standard and Poor’s 500 closed lower by 15.50 points, or 1.26 percent, to 1,209.88, while the Nasdaq composite lost 53.39 points, or 2.01 percent, to 2,604.04.

Crude prices lost ground on Wednesday and declined by over 2 percent. Reports that Germany and France have agreed to a fivefold increase in the European Financial Stability Facility (EFSF) fund provided little support to oil futures, even bullish government report that US crude stocks fell by 4.7 million barrels last week could not provide much help. The prices were mainly hit by Moody’s decision to downgrade Spain’s rating by two notches to A1, which again brought Europe’s debt problems into focus.

The US Energy Information Administration reported a fall in crude stocks for the week as imports dipped to a 10-month low and refineries cut processing rates. US gasoline inventories fell by 3.3 million barrels last week, but four-week average gasoline demand was still down 1.5 percent from year-ago levels, according to the US Energy Information Administration.

Benchmark crude for November delivery which expires on Thursday, settled at $86.11, dropping $2.23, or 2.52 percent on the New York Mercantile Exchange. In London, Brent crude for December delivery settled at $108.39 a barrel, falling $2.76 or 2.5 percent on the ICE.