Markets to remain in consolidation mood with a cautious start

The Indian markets witnessed some profit booking in last session after a huge rally and also on concern after Fitch expressed fears that the defeat of Congress in four of the five state assembly polls could lead to higher fiscal deficit target as the government would be constrained to curb expenditure. Today, the start is likely to remain cautious, as the global cues are not very supportive and the power sector stocks may keep the markets dragging after the central power regulator issued a new set of draft tariff guidelines for state-owned power utilities, wherein some of the operational norms have been tightened and the financial incentives for achieving transmission and generation targets have been sharply pruned. The new guidelines will be applicable for five years starting April 2014. Auto stocks too will remain under pressure, as car sales in India fell 8 percent to 1.42 lakh units in November from 1.55 lakh units a year ago, the second consecutive month of decline as demand fell after the festive season. There will be buzz in telecom and aviation sector too, as the Home Ministry has opposed hike in Foreign Direct Investment (FDI) caps in sectors like aviation and telecom, citing security concerns.

The US markets ended modestly lower after a lackluster trade in last session, though the selling remained subdued that capped the downside. The Asian markets have mostly made a negative start; Japanese market was trading lower as the Core machine orders despite gaining 0.6 percent in the month of October missed the forecast.

Back home, snapping a three-day gaining streak, Indian equity benchmarks ended the session in the red with a cut of around half a percent with frontline indices tumbling below their crucial 6,350 (Nifty) and 21,300 (Sensex) levels as investors opted to book profits after recent gains. Moreover, investors remained sidelines from taking positions in risky assets ahead of Index of Industrial Production (IIP) data for the month of October and CPI data for the month of November to be announced on December 12. CPI inflation is expected to be at 10%, while IIP is also likely to decline 1% in October. Sentiments remained down-beat since morning after foreign lender HSBC said it sees government breaching its FY14 fiscal deficit target of 4.8% on account of slower revenue and higher expenditure in the first half of the fiscal. Even as Finance Minister P Chidambaram has been reiterating of not breaching the red line on fiscal deficit target, HSBC expects spending-revenue gap to overshoot to 5.1%. Global cues too remained sluggish with most of the Asian equity benchmarks ended the session in the red on heightened speculation that the Federal Reserve may be about to start cutting back on its stimulus program. Moreover, European markets too struggled for direction in early deals. Back home, sentiments also got dampened after Indian rupee weakened due to dollar demand from oil importers and defense related payments. The rupee was trading at Rs 61.21 at the time of equity markets closing as compared with previous close of Rs 61.14 per dollar. Sentiments also got dampened as shares of power generation and distribution firms declined after the Central Electricity Regulatory Commission (CERC) released draft regulations which will decide power tariffs for a period of five years from April 1, 2014. Moreover, stocks related to auto counter too declined after data from Society of Indian Automobile Manufacturers (Siam) showed that domestic passenger car sales declined 8.15% to 142,849 units in November this year compared with 155,535 units sold in the same month last year. Finally, the BSE Sensex declined by 71.16 points or 0.33%, to settle at 21255.26, while the CNX Nifty lost 31.05 points or 0.49% to settle at 6,332.85.