Markets likely to continue the sluggish run with a soft start

The Indian markets extended their decline on Monday, though the start was good but the indices could not hold the gains and worried over the rising inflation and global economic recovery fears plunged in the final hours. Today, the mood is likely to remain somber as the other global markets have lost their momentum and have given up some of their last sessions gains and the domestic markets too are likely to make a soft start. However, the local markets may get some recovery dose in the latter trade as the RBI deputy governor Subir Gokarn hinted at little change in RBI’s stance in light of gloomy IIP data and inflation figures. On the same time the sugar stocks are likely to continue reeling under red on concern that a rise in prices of raw material sugarcane in Uttar Pradesh will dent margins and profitability of companies. Last week, UP raised the state's benchmark sugarcane rate or State Advised Price by Rs 40 per quintal to Rs 230-240 for the current crushing season. The other large sugarcane growing state Maharashtra followed suit by raising the price for the first installment of cane to Rs 180-205 per quintal

Also, there will be lots of result related movements to keep the markets buzzing. Dhanus Technologies, Gokul Refoils, MPS, Tech Mahindra etc are among many to announce their numbers today.

The US markets suffered a setback with the start of the new week and the major indices declined by about a percent with the jump in Italy’s borrowing costs that reminded investors of much to be done to contain Europe’s debt problems. The Asian markets have made a weak start concerned over the surge in Italian borrowing cost.

Back home, Indian stocks markets showed a volte-face on the first day of a new trading week as what started on a promising note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory to complete a hat-trick of negative closes despite getting off to a gap-up opening. Marketmen were optimistic for most part of the session as global sentiments remained upbeat and most markets in Asia rallied by around two percentage points underpinned by renewed hopes that decisive actions to save the Euro-zone nations from bankruptcy are underway and the damage emanating from the Euro zone debt crisis will be limited. However, the sanguinity in local markets was under check as profit booking in metal and rate sensitive Real Estate counters exerted downside pressure on the frontline indices and dragged them even below to the psychological 5,150 (Nifty) and 17,100 (Sensex) levels. Discouraging earnings announcement by heavyweights including M&M, LIC housing, RCom and disappointing WPI inflation numbers played the major role in pounding investors’ morale. October WPI figures showed that India's inflation rate edged closer to double digit mark in October, defying financial market forecasts and aggressive monetary tightening measures by RBI. Earlier on Dalal Street, the benchmark got off to a boisterous opening on hopes that new heads of governments in Greece and Italy will take actions in order to tackle the Euro-zone’s debt crisis. However, the bourses failed to capitalize on the early momentum and slipped to lower levels after worse than expected inflation data discouraged investors from taking large bets. Moreover, the broader markets too succumbed to the selling pressure and went home with large cuts of over one and half a percent. On the BSE sectoral space, the high beta Realty index remained the top laggard in the space and settled with over two and half a percent laceration followed by the Metal and Consumer Durable pockets which went home with over two percent cuts. However, export driven software and technology counters remained the top gainers in the space with gains of around three fourth of a percent as optimism over easing Euro-zone tensions, lured investors. The defensive Healthcare index too did its bit in preventing the markets from drifting to lower levels. Finally, the BSE Sensex lost 74.08 points or 0.43% to settle at 17,118.74, while the S&P CNX Nifty declined by 20.50 points or 0.40% to close 5,148.35.

The US markets closed lower on Monday as Italy’s borrowing costs increased to a euro-era record at an auction, deepening concern that European will struggle to contain its debt crisis. The markets were in pessimistic mood on growing realization that Italy and Greece face daunting tasks in reforming their economies, cut expenses and revenues all at the same time. Investors are increasing the probability of a recession in the euro zone, weakening of the euro and falling US exports may slowdown its economy as well. Markets further came under pressure after German Finance Minister Wolfgang Schaeuble stated that Europe’s permanent bailout fund may not be implemented before 2013 and German Chancellor Angela Merkel’s party voted to offer euro states a way to leave the currency area.

In US, the president spoke at a news conference concluding a summit with Asia-Pacific leaders, where Obama reiterated the US stance that China is keeping its currency artificially low, putting American companies at a disadvantage. Also, with little more than a week to go until a November 23 deadline, members of Congress’ super committee remained divided along partisan lines in their effort to devise $1.2 trillion or more in deficit savings during the next decade.

The Dow Jones industrial average lost 74.70 points, or 0.61 percent, to 12,079.00. The Standard and Poor’s 500 closed lower by 12.07 points, or 0.96 percent, to 1,251.78, while the Nasdaq composite lost 21.53 points, or 0.80 percent, to 2,657.22.

Crude prices declined on Monday worried by the report showing a sharp drop in euro zone industrial production. The EU’s statistics office said that Euro zone industrial production fell 2.0 percent in September from August. On the same time the euro slumped against the dollar as new governments in Italy and Greece failed to assuage fears about the euro zone debt crisis.

Benchmark crude for December delivery fell 85 cents, or 0.86 percent, to settle at $98.14 a barrel on the New York Mercantile Exchange, In London, Brent crude for December ended down $2.27, or 1.99 percent, at $111.89 a barrel on the ICE.