Markets to get a cautious start tailing the weakness in regional peers

The Indian markets were butchered in last session with benchmarks losing around three and half a percent in a single day, there was concern of rating downgrades coupled with sharp depreciation in rupee that pulled the markets lower. Today, the start is likely to be cautious on weak regional cues, though some recovery and value buying too can be expected at the lower levels. Traders will be eyeing the rupee movement which turned lower on expectation of war breaking out in Syria. Also, D Subbarao will demit office after a 5-year stint as RBI Governor, passing the baton to Raghuram G Rajan. There will be buzz in the realty and banking sector, as the RBI has barred banks from giving upfront loans for under-construction projects through schemes like 80:20. The RBI’s decision will force developers and banks to be more transparent in explaining the benefits of the scheme to buyers. There will be some action in PSU oil marketing companies too, as the Prime Minister’s Economic Advisory Council Chairman C Rangarajan has pitched for substantial increase in diesel prices to meet the fiscal deficit target. He has also pegged economic growth at 5-5.5 per cent for the current financial year and has said that the economy still had the potential to grow more than the previous year’s growth rate of five per cent.

The US markets ended higher on Tuesday after a long weekend though major upside was restricted on lingering concerns about the situation in Syria and the outlook for the Federal Reserve’s stimulus program. The Asian markets have mostly made a soft start with many of the indices slipping over half a percent in early deals on concern that US is nearing a strike on Syria.

Back home, Indian markets were butchered on Tuesday with both the major indices losing massive around three and half a percent to close near their intraday lows, breaching major crucial support levels of 18,300 (Sensex) and 5,350 (Nifty), as investors opted to cash out most of their profits garnered in previous three sessions of rally. Though, Indian equity bourses opened slightly in the green but turned red very soon and never looked in recovery mood, continuing their slide till end. Selling was both brutal and wide-based as none of sectoral indices on BSE was spared. Counters, which featured in the list of worst performers, included banking, consumer durables and realty. Sentiments remained dampened after rupee got depreciated sharply during the trade. The partially convertible rupee was trading near 68 per dollar mark as compared to the yesterday’s close of 66.02 against the dollar on the Interbank Foreign Exchange. Investors also remained on sidelines, awaiting any fresh measures with Raghuram Rajan taking over the reins of Reserve Bank of India (RBI) as the new governor on September 5. Selling got intensified in last leg of trade as geopolitical concerns weighed on sentiment after Russia reportedly announced that its missile early warning system had detected the launch of two missiles from the central part of the Mediterranean Sea, fired towards the sea's eastern coastline. However, US officials confirmed that no American ship or plane launched missiles. Weakness in European markets too dampened the sentiments, however, most of the Asian equity indices shut shop in the green. Back home, sentiments got clobbered out of shape after global financial services major HSBC slashed India’s GDP growth forecast for the current financial year to 4% from 5.5% earlier, citing chances of economic uncertainty weighing on the growth forecast in the coming months. Meanwhile, Standard & Poor’s considers chances of a credit ratings downgrade for India higher than that for Indonesia. It has also warned that India’s sovereign rating faces more than one in-three chance to be downgraded to the junk status within next two year. Finally, the BSE Sensex shaved off 651.47 points or 3.45 % to settle at 18234.66, while the CNX Nifty plunged by 209.30 points or 3.77% to end at 5,341.45.