Markets likely to get a cautious start of the F&O expiry day

The Indian markets suffered sharp cuts in last session, mainly due to the RBI’s latest measures to further tighten the liquidity condition for the banks. Today, the expiry of the July F&O series is likely to be cautious tailing weakness in the global markets, so far the series has been good and volatility may not be ruled out after last sessions’ plunge. Traders will be watching the movement of rupee, whether it manages to strengthen further on not after posting huge gains on RBI action. There will be buzz in the cement sector, as in a biggest ever merger & acquisition deal Switzerland-based Holcim will increase its holding in Ambuja Cements to 61.39% from 50.55%. In turn, Ambuja Cements will acquire its holding company Holcim India’s 50.01 stake in ACC. The merger of Holcim India would be in the ratio of one Ambuja Cement share for 7.4 Holcim India shares, translating into an implied swap ratio of 6.6 Ambuja shares for every ACC share. Meanwhile, an EGoM meet that was to consider making available natural gas to fuel starved power plants from sources other than Reliance Industries' KG-D6 fields, has again been postponed. In scrip specific movement IOC will be in action, as the Cabinet will consider a proposal to divest 10% stake in the company.

There will be lots of important result announcements too, ACC, Bata India, Biocon, Birla Corp, Container Corp, Gail India, IOB, ITC, Kalpataru Power, Kansai Nerolac, Mahindra & Mah Fin, Maruti Suzuki, MRF, Muthoot Finance, Prism Cement, Raymond, SKS Microfinance, State Bank of Mysore, Sterlite Inds, Torrent Power and Zee Entertainment are among the many to announce their numbers today.

The US markets ended mostly lower for yet another day, following a choppy session induced by some negative earnings, though the economic reports remained encouraging but traders overlooked them. New home sales in US surged up by 8.3 percent to an annual rate of 497,000 in June. The Asian markets have made mostly a weak start and some of the indices are trading lower by about a percent after good home sales data in US raised concerns about the outlook for the Federal Reserve's stimulus program.

Back home, pressurized by weak global cues coupled with RBI’s latest measures, Indian equity markets ended the Wednesday’s session with a cut of over a percentage point with frontline gauges tumbling below their psychological 20,100 (Sensex) and 6,000 (Nifty) levels. Sentiments remained down-beat with banking stocks bearing most of the brunt. After a negative opening, the domestic bourses never showed any sign of strength and continued sliding till end though, marginal recovery was seen in last leg of trade on rupee strength, but it was not enough to pull back markets into the green terrain. Selling was both brutal and wide based, barring software and technology, none of sectoral indices on BSE ended in green. Moreover, investors remained cautious as it was the penultimate day of July series F&O expiry. The BSE Bankex counter edged lower as sentiments got dampened after the RBI reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrow funds from the central bank. The limit will come into force with immediate effect and continue till further notice, the RBI in another measure to suck out liquidity from the system, has asked banks to maintain higher average CRR (cash reserve ratio) of 99 per cent of the requirement on daily basis as against earlier 70 per cent. CRR is portion of deposits that banks are required to keep with RBI. Asian markets ended mixed after a choppy trade with Chinese benchmark ending with a cut of over half a percent. However, European markets opened in the green ahead of manufacturing activity data from the euro-zone. Back home, sentiments also got clobbered as metal stocks like JSW Steel, Sesa Goa, Sterlite Industries, SAIL, Nalco and Tata Steel edged lower after a private survey showed manufacturing weakened further in July in China. Additionally, selling witnessed in retail related stocks on the buzz that government may not change the FDI policy to suit any particular company. Bucking the trend, telecom stocks viz. Bharti Airtel, Idea Cellular and Reliance Communication edged higher on hopes that the government may reduce spectrum price for the upcoming third round of auctions. Finally, the BSE Sensex shaved off 211.45 points or 1.04% to settle at 20,090.68, while the CNX Nifty plunged by 87.30 points or 1.44% to end at 5,990.50.