Markets to make another weak start on feeble global cues

The Indian markets put a valiant effort in the last hour of trade in previous session but profit booking on concerns of global and domestic economic sluggishness led the indices for another weak closing. Today, the global cues remain alarming as after the US markets, the Asian markets too are reeling in red and that could led the domestic markets to a gap-down start. The markets after a series of pounding may see some recovery in late trades but all will depend on the movement in the European markets and how they trade ahead of the debt sale in two nations. Meanwhile, late evening RBI announced open market operation and has said it will buy government bonds worth Rs10,000 crore from investors for the first time this fiscal on November 24 to ease the pressure on interest rates. However, the markets are likely to remain under pressure as International credit rating agency Moody’s has said that India’s public debt at 70% of its GDP is preventing it from securing an investment-grade rating. Some jitters may be seen in iron companies as the Chief Minister of Orissa has reiterated his demand for an immediate ban on export of iron ore.

Meanwhile, the cabinet has approved foreign direct investment of up to 26 percent in the pension sector the decision will give global players access to roughly $12 billion of assets. The bill will now be considered by parliament in the winter session that starts next week.

The US markets ended sharply lower on Wednesday after tumbling in late hours as Fitch Ratings put out a report saying US banks could take a big hit if Europe’s debt crisis spreads. However, the domestic economic reports remained positive but were unable to make any impact on the markets. The Asian markets have extended their somber run for yet another day with most of the indices trading to one-month low as oil and the euro declined amid concern that European nations may face higher borrowing costs after the scheduled French and Spanish debt sale.

Back home, it turned out to be a rollercoaster ride for the frontline indices on Wednesday which showed wild swings in the dying hours of trade only to quintuple the sorrow of closing in the negative terrain. The session was characterized by high amount of volatility as the indices tried hard to claw beyond the psychological 5,100 and 16,900 levels but it seemed like the bears had the last say as they stalled the resurgence of the benchmarks twice in the session and took profits off the table. Sentiments in domestic markets were dampened amid the lingering turbulence in the Euro-zone as the local gauges largely remained influenced by the moves in European equity markets. Back home, fears of slowdown in the economy kept investors nervous while the free fall in rupee also added to the woes as the currency made fresh 32 month lows in the session before coming near previous day's closing value. Reports that India’s September services export receipt declined by 5.63% month on month too did its bit in undermining sentiment. Earlier on Dalal Street, the benchmark got off to a negative opening since investors largely were influenced by the pessimistic sentiments prevailing in Asian markets. Thereafter, the bourses treaded on a southbound journey without any fervor through the first half. But in second half the key gauges showed signs of recovery on the back of positive cues from European counterparts. However, the indices succumbed to extreme volatility and touched lowest levels in the day only to bounce back in no time to the highest levels in the dying moments. On the BSE sectoral space, the Capital Goods index remained the top laggard in the space and got heavily pounded by close to four percent after heavyweights like BHEL and L&T nosedived by a massive over four percent. The Power and Oil & Gas pockets too went home with huge cuts while some short covering in Banking stocks helped Bankex index to pare its losses. On the other hand, the consumer durables and defensive FMCG counters bucked the somberness prevailing in the markets and settled with over half a percent gains. Finally, the BSE Sensex lost 106.80 points or 0.63% to settle at 16,775.87, while the S&P CNX Nifty declined by 38.05 points or 0.75% to close 5,030.45.

The US markets slumped on Wednesday, after Fitch Ratings signaled trouble for US banks if Europe’s debt trouble worsens. In another volatile session involving Europe, US markets briefly erased losses on hopes that the Federal Reserve might assist the European Central Bank in its efforts to curb Europe’s debt trouble. Already down, the US markets declined further in the final hour after Fitch stated that unless the Eurozone debt crisis is resolves in a timely and orderly manner, the broad credit outlook for the US banking industry could worsen.

The markets slid even after there were good reports on economic front, figures from the Federal Reserve had industrial production climbing 0.7% in October, illustrating the manufacturing sector is participating in economic growth in the final quarter of 2011. Manufacturing expanded 0.5% after rising 0.3% in September as motor vehicles production increased 3.1% and mining output increased 2.3%. The Labor Department stated that the cost of living dropped 0.1% in October from the prior month, indicating inflationary pressures could be on the decline. The so-called core rate excluding food and fuel costs climbed 0.1%.

The Dow Jones industrial average lost 190.57 points, or 1.58 percent, to 11,905.60. The Standard and Poor’s 500 closed lower by 20.90 points, or 1.66 percent, to 1,236.91, while the Nasdaq composite lost 46.59 points, or 1.73 percent, to 2,639.61.

US crude futures surged on Wednesday on news of plans to reverse the Seaway crude oil pipeline next year, a move expected to help relieve an oil glut at the Cushing, Oklahoma hub. The Seaway pipeline will be reversed, allowing 150,000 barrels a day of crude to move out of the congested Cushing hub to the Gulf Coast refining region by the second quarter of 2012. News of the reversal led investors aggressively selling ICE Brent crude while buying up Nymex crude contracts. The Obama administration proposed doubling auto fuel efficiency to 54.5 miles per gallon by 2025.

Meanwhile, according to the Energy Information Administration (EIA), Crude oil stocks fell 1.056 million barrels in the week, Distillate stocks--heating oil and diesel--dropped by 2.136 million barrels, compared with an expectation of a 3-million-barrel drop. Gasoline stocks gained 992,000 barrels.

Benchmark crude for December delivery rose $3.22, or 3.24 percent, to settle at $102.59 a barrel, after trading in a range from $98.39 to $102.89 on the New York Mercantile Exchange. In London, Brent crude for January delivery settled 30 cents lower, at $111.88 a barrel on the ICE.