Markets likely to get a flat-to cautious start

The Indian markets in tandem with the global markets fell in the last session but the damage was grave for the day and the major indices after losing over two and half a percent moved far away from their crucial levels. All the sectoral gauges plunged with rate sensitives’ suffering the most. Today, the start is likely to be cautious and some recovery can be seen after the continuous beating. There will be buzz from the political circles with the start of the Winter Session and that may take some attention from the markets. IT stocks are likely to remain under pressure after the bellwether Infosys hinted of revenue growth slowdown in the coming months. The company has been warning that globally uncertainty remains high and decision-making takes longer even though customer spending has not come down so far. Also, research firm Gartner expects growth in global IT spend to slow down in 2012 to 3.8 percent in 2012 compared to 5.9 percent this year. However, IT spending in India is projected to grow by 9.1 percent. Oil companies too are likely to remain buzzing as the global crude prices have declined further and on the domestic front the government has said it would soon decide on the price of ethanol that is blended with petrol.

The US markets made a dismal closing on Monday after the lawmakers abandoned their high-profile effort to rein in the country’s ballooning debt that indicates that Washington is not likely to be able to resolve a dispute over taxes and spending until 2013.However, a respite came as Standard & Poor’s and Moody’s Investors Service said they won’t lower ratings on the US despite congressional committee failing to reach an agreement. The Asian markets have made a mixed start, Japanese markets is trading flat as yen weakened against dollar on rating confirmation of US government’s credit grades. Also the World Bank has said that most Asian nations have room to use fiscal stimulus to protect their economies.

Back home, the November series F&O contract expiry week got off to a dispiriting beginning as the benchmark equity indices got bludgeoned by over two and half a percent in the session and extended the sorrow of closing in the negative terrain for the eighth straight session. The frontline indices’ southbound journey only halted with the close of the trading session and the key gauges even slipped below the psychological 16,000 (Sensex) and 4,800 (Nifty) levels as market participants continued to remain concerned about the prospects of risky asset classes like equities amid signs of slowing domestic economic growth and sluggish policy initiatives and debt crises in the US and Europe. Furthermore, the rupee breached the psychological 52 mark against the US dollar, an all time closing low for the local currency and continued to adversely impact the importers. The currency hit fresh 32-month lows against the dollar despite reports suggesting that the RBI has intervened in the currency markets to stall the slide in rupee. Meanwhile sentiments also took a hit after a CII survey showed that manufacturing sector growth moderated in the first half and is likely to slow down further in the ongoing quarter because of the rise in input costs and uncertainties in the global economy. Earlier on Dalal Street, the benchmark got off to a sluggish opening since sentiments remained weak following the pessimism prevailing in Asian markets. Thereafter, the bourses treaded on a southbound journey and showed absolutely no signs of recovery through the session. The selling pressure aggravated from the mid noon trades as European markets collapsed to trade with large cuts of over two percent. The key gauges eventually shut shops with huge losses around the lowest levels of the day. On the BSE sectoral space, the Metal index remained the top laggard in the space with about three and half a percent losses. The rate sensitive Bankex and Realty pockets too went home with cuts of over three percent. Finally, the BSE Sensex plummeted by 425.41 points or 2.60% to settle at 15,946.10, while the S&P CNX Nifty shaved off 127.45 points or 2.60% to close 4,778.35.

The US markets sank on Monday, as the lack of progress by American lawmakers in reaching a deficit-cutting agreement magnified worry that Europe’s debt crisis would spur a global downturn. The markets extended losses into a fourth consecutive session where the good news is being totally discounted, and the fear of the worst-case scenarios are being priced in. The National Association of Realtors reported sales of previously owned US homes climbed 1.4% last month to a seasonally adjusted annual rate of 4.97 million, suggesting slight improvement in the troubled sector.

In Washington, the super-committee, comprising six Democrats and six Republicans from the House and Senate, was formed in August by the legislation that hiked the US debt ceiling. The panel has until Wednesday to come up with at least $1.2 trillion in deficit reduction to avoid automatic spending cuts of the same amount in 2013. The US is heading for automatic spending beginning in 2013 if lawmakers fail to agree before the deadline this Wednesday.

Besides in Europe, Germany’s Finance Ministry stated that the country’s expansion has gotten noticeably slower while another report issued yesterday had rating agency Moody’s Investors Service warning that elevated borrowing costs and a wobbly economy pose a threat to France’s credit outlook.

The Dow Jones industrial average lost 248.85 points, or 2.11 percent, to 11,547.30. The Standard and Poor’s 500 closed lower by 22.67 points, or 1.86 percent, to 1,192.98, while the Nasdaq composite lost 49.36 points, or 1.92 percent, to 2,523.14.

Crude prices continued their decline on Monday tailing the equity markets and on concerns of European debt crisis. Also, the dollar hit a six-week high against a basket of major currencies after US leaders failed to agree on a deficit-cutting measures prompting a shift from riskier currencies into the safety of the US currency. Lawmakers met one last time Monday in order to seek a last-minute deal, but markets are already considering it a failure. The statement of Chinese Vice Premier Wang Qishan that a long-term global recession is certain to happen and China must focus on domestic problems, further dampened the morale of the traders

Benchmark crude for January settled down 75 cents, or 0.8%, to $96.92 a barrel, after trading in a range from $95.61 to $97.86 on the New York Mercantile Exchange. In London, Brent crude for January lost 68 cents, or 0.6%, to settle at $106.88 a barrel on the ICE futures exchange.