Markets to remain in recovery mood on the F&O expiry day

The Indian markets after a volatile trade in the last session ended flat with benchmarks managing a close just below their crucial levels. Today, the start is likely to be cautious but positive though being the F&O expiry day, huge volatility is not ruled out also big short covering can be seen in specific stocks that may take the markets higher. Traders will be eyeing the rupee movement which closed at a record low level in last session. Meanwhile the government has turned down fears of any sharp spike in fiscal deficit this year because of the food security programme that will be implemented once the legislation is through in Parliament. Though, there will be some concern too, as the global rating agency Standard and Poor's has cautioned that large deficit economies including India could face more economic problems in the near term. The PSU oil marketing companies too will keep buzzing on concern that they might again start losing money on petrol sales. While, the Reserve Bank of India (RBI) opened a special window to help the three PSU oil marketing companies needing about $8.5 billion every month meet their daily foreign exchange requirement in a bid to check the rupee’s free fall.

The US markets stabilised on Wednesday and ended with modest gains, mainly on the back of bargain hunting at lower levels and optimism of delay in Fed’s tapering after the report of a bigger than expected drop in pending home sales in July. The Asian markets have mostly made a positive start after plunging to their two months low, supported by commodity stocks mainly oil explorers, on concern of military action of United Forces against Syria.

Back home, Indian equity benchmarks staged a smart recovery in second half of trade on Wednesday and ended the session flat; pairing around all of their early losses, supported by significant buying in software counters amid expectations of margin improvement after rupee breached yet another record low of 68 per US dollar. Earlier, markets made a gap-down start pressurized by feeble global cues and coupled with weakness in rupee. The rupee today breached the 68-mark against the dollar for the first time in history and quoted at all time low of 68.75 in early deals. Sentiments also remained dampened after share prices of three public sector oil marketing companies BPCL, HPCL and IOC plunged as the international crude prices surged on escalating geo-political tension. Though, there are also reports that diesel prices may be increased by at least Rs 3 a litre after the monsoon session of Parliament ends next week. Global cues too remained unsupportive as most of the Asian equity indices shut shop in the red on concern that US will take military action against Syria. Back home, selling was both brutal and wide as frontline indices lost their crucial 17,500 (Sensex) and 5,150 (Nifty) levels in early trade, but markets started paring losses afterwards, taking support from buying in software and metal counters and short covering in fundamentally strong stocks. Slight recovery in Indian rupee too supported the sentiments. The recovery got accelerated in last leg of trade and both the frontline gauges entered into green terrain on the buzz that Life Insurance Corporation (LIC) - India’s biggest domestic institutional investor was spotted buying shares which helped the Indian stocks to stage a strong intraday rebound. However, bout of volatility was witnessed in dying hours and markets ended flat as investors remained on sidelines ahead of Futures and Options expiry of August derivate contracts tomorrow followed by first-quarter GDP data on Friday which will determine the market trend going ahead. Finally, the BSE Sensex gained 28.07 points or 0.16% to settle at 17996.15, while the CNX Nifty declined by 2.45 points or 0.05% to end at 5,285.00.