Markets may consolidate amid F&O expiry volatility

The Indian markets after a day of break once again returned to the declining path and the benchmarks touched their two years low on Wednesday. There was across the board selling and investors opted to take whatever they can, fearing a further slump in the markets. Today, the Asian markets cues are indicating some consolidation for the Indian markets. Though, the F&O expiry session is likely to be volatile and the latter half of the trade will be crucial. The PSU oil marketing companies may get some respite with the plunge in international crude prices, while the retail stocks will be in limelight as the Union Cabinet is scheduled to meet today to decide on allowing Foreign Direct Investment in the multi-brand retail. It is also being reported that the Cabinet is likely to approve 51 per cent Foreign Direct Investment in multi-brand retailing. The Cabinet will also talk about setting up retail branding outlets only in those cities which have a population of over 10 lakh as per the census. They will also address concerns about textiles, electronics and a final call will be taken by the government on these.

There will be lots of scrip specific actions to keep the markets buzzing; Tata Sons has named Cyrus P. Mistry, the son of its biggest shareholder, as successor to Chairman Ratan Tata, while the Chairman of SKS Microfinance, Vikram Akula has quit at the time when the company’s board was all set to sack him.  

The US markets plunged on Wednesday with all the major indices losing over 2 percent for the day. Poor results of a debt auction at Germany, the Europe's strongest economy suggested that Europe’s crisis might be infecting strong nations. Also there were weak economic reports that too weighed on the sentiments. While, banking shares fell after the Fed’s announcement of fresh round of stress tests of the biggest banks. The Asian markets have made a mixed start, apart from Chinese and the Japanese markets all other major indices are trading marginally in green.

Back home, a session after witnessing a dead cat bounce, Indian frontline indices picked up from where they had left on Monday as marketmen grew increasingly pessimistic about the market outlook amid growing evidence of slowing down global economy. The benchmarks witnessed panic selling in the session and got obliterated by over two percent to around the lowest levels seen in last two years. Largely across the board carnage was seen on Dalal Street as market participants ruthlessly squared off hefty positions from heavyweight stocks a day ahead of November series derivative contract expiry. Sentiments across the globe appeared gloomy as Asian markets exhibited dispiriting trends amid prolonged anxiety over the fate of global economic growth while the European shares too extended their downtrend for a fifth straight session. Investors’ confidence got dented on getting the disappointing Chinese preliminary manufacturing PMI data which showed factory activity decelerated at a faster-than-expected pace to 32-month low levels in November while reports of slower than estimated US GDP growth too revived concerns of a global recession. Earlier on Dalal Street, the benchmark got off to a sedate opening as sentiments were largely influenced by pessimistic cues from Asian markets and overnight sell-off on Wall Street. The benchmarks failed to show any kind of fervor and kept drifting to lower levels through the morning trades. But the early noon session saw across the board sell-off which led the frontline indices to nearly two year lows but some short covering thereafter ensured that the local bourses eventually settle off the low point of the day. The NSE’s 50-share broadly followed index Nifty, got thrashed by over two percent to settle above the crucial 4,700 support level while Bombay Stock Exchange’s Sensitive Index Sensex got pounded by over three hundred fifty points and closed below the psychological 15,700 mark. Moreover, the broader markets too got pulverized as they settled with large cuts of close to two percent but outperformed their larger peers. On the BSE sectoral space, market participants booked hefty profits in the Capital Goods counter which got thrashed by a massive three percent, while the Technology and Oil & Gas counters also got butchered by around two and half a percent. On the other hand, the Consumer Durable counter remained the only counter that managed to snap the session in the positive terrain with around half a percent gains. Finally, the BSE Sensex shaved off 365.45 points or 2.27% to settle at 15,699.97, while the S&P CNX Nifty plummeted by 105.90 points or 2.20% to close 4,706.45.

The US markets sank on Wednesday, as costs to insure European government debt rose to a record after a German bund auction fueled concern the debt crisis is worsening. Concern that turmoil in European bond markets is threatening the global economic recovery was amplified by data showing European services and manufacturing output shrank for a third month, while a preliminary gauge indicated China’s manufacturing contracted by the most since March 2009, according to reports by Markit Economics.

Conversely, the United States sold $29 billion in seven-year notes at a record low auction yield. The markets offered little reaction to domestic data, which showed consumer spending rising less than projected as well as orders for durable goods falling in October. Other reports had more first-time applicants than estimated filing for jobless benefits last week, although the overall count remained under 400,000 for a third week, while US consumer confidence for November ticked up to its highest level since June, albeit at a relatively low level.  Besides, the US Federal Reserve announced that the banks will be stress tested for the deterioration in the euro zone liquidation conditions and a possible debt contagion rooted in the region.

The markets were also cautious as Greece and Italy inched forward in implementing economic reforms. Germany’s debt agency had to keep nearly half of a sale of 6 billion euros as a result of too few bidders, with the poor results pushing up the borrowing cost over 10 years for Europe’s powerhouse economy.

The Dow Jones industrial average lost 236.17 points, or 2.05 percent, to 11,257.50. The Standard and Poor’s 500 closed lower by 26.25 points, or 2.21 percent, to 1,161.79, while the Nasdaq composite lost 61.20 points, or 2.43 percent, to 2,460.08.

Crude prices fell on Wednesday on concern of global economic recovery as disappointing Chinese and European data highlighted dangers to oil demand from the euro zone debt crisis and a slowdown in China. Though, the weekly crude report of American Petroleum Institute showed US crude stocks fell 5.6 million barrels last week as imports dropped. Markets were also spooked by a disappointing German bond auction, which drew some of the weakest demand since the introduction of the euro.

Benchmark crude for January delivery fell $1.84, or 1.9%, to $96.17 a barrel after trading in a range of $95.76 to $97.87 on the New York Mercantile Exchange. In London, Brent crude was down $1.49, or 1.4%, to $107.54 a barrel on the ICE futures exchange.