Markets to remain in consolidation mood with a cautious start

The Indian markets suffered sharp profit booking in last session and the major indices lost over a percent, as traders took the opportunity to take off their gains after the recent rallies. Today, the start is likely to remain cautious but markets will be getting some support with finance minister P Chidambaram saying that the second quarter numbers for India’s current account deficit could well show a level close to zero, helped by gold control measures. Also, Plan Panel Deputy Chairman Montek Singh Ahluwalia has said that the worst is probably over for the economy and the performance would be better in the second half of this fiscal. There will be some buzz in precious commodities too, as the commodity market regulator FMC has removed an additional 5 percent margin on the future contracts of gold and silver due to less volatility in prices of these commodities. There will be some buzz in the banking sector, as two of the major banks SBI and HDFC bank have increased their base lending rate, first since the RBI hiked its benchmark repo rate by 25 basis points on October 29.

There will be some important result announcements too, to keep the markets ticking. Ashok Leyland, BHEL, Gati, Hindustan Fluoro, Indraprastha Gas, Nava Bharat Ventures, SJVN, Sobha Developers,  State Bank Mysore, Thermax and Voltas are among many to announce their numbers today.

The US markets consolidated on Tuesday and ended almost flat, however the major indices staged a significant recovery over the course of the morning but pared most of the gains on some good economic reports as US service sector activity expanded at a faster rate in October. The Asian markets have made a soft start with majority of the indices in the region trading lower by quarter to half a percent. The Japanese market though has trimmed its losses ahead of the release of a slew of corporate earnings reports.

Back home, trade at Indian markets remained volatile on Tuesday, coming from a day of break after the short Muhurat session on Diwali. Traders remained in profit booking mood since the start, though there was smart recovery towards the noon that took the markets out of their day’s low but traders once again took that opportunity to book profits, restricting the markets to enter the green terrain, on the contrary selling aggravated in the final hours taking the indices lower by over a percent near the lows of the day. However, there was some attempt towards the north too in early deals after global investment bank, Goldman Sachs raised its investment stance on India to ‘Marketweight’ and increased the Nifty index target to 6900 but that too was sold out. In the global markets, while the US indices managed a positive close overnight, the Asian markets made a mixed closing with some of the regional indices recovering from their early lows to end modestly in green. Later the European markets made a flat but positive start and gave some support to the local markets, but going forward all the major indices slipped into red and weighed on the local market sentiments. Back home, the day turned out to be of profit booking for the Indian markets with traders taking every opportunity to take their gains from the recent rally and markets losing their momentum completely in the very first hour of trade, however there was good bounce back in afternoon supported by realty and auto stocks that took the markets to almost the level of early morning but traders opted to book profits at the highs, taking the markets lower once again afterwards the trade remained range bound with no serious efforts to enter the green. There remained some caution with the report that the activity in services sector, which makes up nearly 60% of country’s economic output, remained below the 50.0 no-change mark for the fourth successive month in October, indicating a further contraction. Earlier, it was reported that foreign direct investment (FDI) inflow into the services sector, declined 47.5 percent to $1.19 billion during April-August. However, one positive emerged for the day was the buying interest in the broader markets, which after initial decline recovered and outperformed the benchmarks. Sectorally, while realty and PSU managed to close in green, defensive FMCG and healthcare were the laggards, while the IT sector turned lower after rupee recovered from its lows. Finally, the BSE Sensex lost 264.57 points or 1.25%, to settle at 20974.79, while the CNX Nifty plunged by 64.20 points or 1.02% to settle at 6,253.15.