Markets likely to get another soft start on weak regional cues

The Indian markets were unable to get any respite from their continuous plunge and benchmarks deposed around another one and half percent in the last session.Selling was spread across the board and realty took the maximum beating. Today, the start is likely to be soft-to-cautious as the other global markets mood is not looking optimistic. All eyes are on the Euro zone developments and the local markets too will take cues from the European markets opening and if they show some consolidation, recovery can be expected in the domestic markets in the latter part of the day. The PSU oil marketing companies are likely to keep buzzing as the state oil refiners cut petrol prices by 1.85 rupees/litre from Wednesday, while the international crude prices surged to a four month high overnight. However, traders are likely to gain some confidence with Sebi chairman UK Sinha saying that Sebi will take action against those found manipulating IPOs of companies and pitched for more checks and balances in high-frequency trading.

The depreciating rupee has become a major concern; the Reserve Bank of India (RBI) has reiterated its stand that it would not target any level for the Indian currency. While the apex bank may act to ease liquidity pressures in the system, it would not directly target bringing down yields on the benchmark bonds.

The US markets made a flat closing on Tuesday, slightly encouraged by report that said consumer spending increased more than expected in October, also US retail sales rose more than expected. However, European debt issues continued to hang over the market. The Asian markets have made a soft start and barring one or two indices in the region, all are trading in red amid concern that Italy’s new government will struggle to trim its debt.

Back home, the carnage at Indian stock markets prolonged for yet another session as the benchmarks continued to sway to the tune of depressing global developments and deposed another over a percentage points on Tuesday. Sentiments in the domestic markets are continuously deteriorating session after session as lack of significant upside triggers on the domestic front and depressing developments from the global front continue to dissuade investors from Indian equities. Trade remained lackluster for most part of the day as investors were reluctant to initiate large bets and evidently preferred to indulge only in stock specific activity amid a slew of earnings announcements. Sentiments globally were unenthusiastic as Asian peers traded on a weak note while European counterparts got bludgeoned. Investors’ took to risk aversion globally amid mounting worries over the ability of new governments in Greece and Italy to tackle the sovereign debt trouble by undertaking necessary fiscal reforms. Earlier on Dalal Street, the benchmark got off to a negative opening and the indices slipped below the psychological 5,150 and 17,100 levels in the early moments of trade since investors largely remained influenced by the cautiously pessimistic sentiments prevailing in Asian markets. Thereafter, the bourses failed to capitalize on the early momentum and kept see-sawing around the neutral till mid noon trades. However, the key gauges suffered a setback in the last leg of trade as sudden bouts of profit booking emerged in the local markets following the somberness prevailing in  European markets, post which the indices could not stage any kind of recovery and extended the sorrow of closing in the negative territory for fourth straight session. The frontline indices traded on an unenthusiastic note for most part of the day as marketmen looked at every rise as opportunity to take profits off the table from the risky asset classes. On the BSE sectoral space, the high beta Realty index once again remained a top laggard in the space and got heavily pounded by over five percent after majors like DLF and HDIL nosedived by a massive 6.66% and 8.29% respectively. The Capital Goods and Power pockets too went home by huge over two percent cuts. Finally, the BSE Sensex shaved off 236.07 points or 1.38% to settle at 16,882.67, while the S&P CNX Nifty plunged by 79.85 points or 1.55% to close 5,068.50.

The US markets closed marginally higher on Tuesday, optimism were bolstered with the growth in retail sales, also data from the Commerce Department showed consumers giving the US economy a lift entering the last quarter of the year, with retail sales climbing more than estimated in October, up 0.5%. The positive economic data overshadowed the rising debt stress in the euro zone as yield increase in sovereign bonds spread to Holland, Belgium, Spain and Italy amid speculation that Italian Prime Minister-designate Mario Monti will form a new government to battle the debt crisis.

Retail sales in the month increased 7.2% from a year ago. Separately, the Labor Department stated that US wholesale price in October declined at the fastest monthly rate since February 2010. The Producers Price Index declined 0.3% in October after rising at 0.8% in September. Also, the Federal Reserve Bank of New York’s index of economic activity edged upward - its first positive reading since May.

The Dow Jones industrial average gained 17.18 points, or 0.14 percent, to 12,096.20. The Standard and Poor’s 500 closed higher by 6.03 points, or 0.48 percent, to 1,257.81, while the Nasdaq composite gained 28.98 points, or 1.09 percent, to 2,686.20.

Crude prices surged on Tuesday supported by good economic data, however the gains were less pronounced due to the concern that new leaders in Italy and Greece, could carry out tough economic reforms or not and as the euro fell for a second straight day on fears the euro zone’s debt crisis is spreading across the region. Meanwhile, the US crude oil futures closed above $99 a barrel on Tuesday to post a 16-week high after retail sales and New York regional manufacturing data that signaled a better outlook for oil demand, while French and German economy posted solid growth in the third quarter, supporting the prices to move higher.

Benchmark crude for December delivery settled at $99.37 a barrel, up by $1.23 or 1.25 percent, after hitting a session high of $99.84 on the New York Mercantile Exchange. In London, Brent crude for December expired and settled at $112.39, up by 50-cent or 0.5% on the ICE.