Consolidation likely to continue with a soft start for the markets

The Indian equity markets despite a mid day recovery could not give a follow up to the last sessions’ rally on Tuesday and the benchmark indices lost about a percent on profit booking. Apart of the defensive sectors, all the sectoral gauges lost considerably. Today, the start is likely to be soft-to-cautious and the traders will be eyeing the quarterly GDP numbers to be announced later in the day. The street is apprehensive of the September quarter GDP coming to its lowest in nine quarters. The economy grew at 7.7% in the April-June quarter but in this quarter the numbers are likely to come sharply lower to around 7%, anything lower than that will dampen investors’ morale, while a slightly better number can give a push to the markets. The string of interest rate rises and lack of policy initiatives has weighed on the industrial growth; however the government has said that it has pursued prudent fiscal measures to boost slowing Indian economy. Meanwhile, the logjam in parliament on Retail FDI continues and the retail stocks are likely to remain under somber mood, however, Prime Minister Manmohan Singh on Tuesday indicated that his government would not roll back the decision to allow 51% FDI in multi-brand retail.

The US markets made a mixed closing on Tuesday despite a good report of consumer confidence that rebounded in November. In Europe, Italy was able to sale bonds but paid record yields of nearly 8% to sell three-year paper and a 10-year bond at a euro lifetime high of 7.65%. The Asian markets have made a mixed start snapping the streak of sharp two-day gain this month after Standard & Poor’s cut credit ratings on US lenders from Bank of America Corp. to Goldman Sachs Group Inc.

Back home, Indian equity markets buckled under across the board selling pressure exerted by market participants in the second half of Tuesday’s session, leading the frontline indices to partly undo the good work done in the previous session. The benchmark indices, which witnessed about three percentage point rally in the session gone by, even got dragged below the psychological 4,800 and 16,000 levels in the session. The domestic bourses were once again tormented by global developments as investors fretted over global economic growth prospects which prompted them to take profits off the table amid little signs of any supportive leads. Sentiments went awry since early afternoon trades tracking gloomy developments in the Europe. Position squaring gathered greater momentum as investors turned apprehensive on the back of reports that rating agency S&P may revise outlook of France's AAA rating to negative in the coming few days. Earlier on Dalal Street, the benchmark got off to a sluggish opening, overlooking the sanguine cues that Asian equity indices exhibited since the start of trade. After slipping to lower levels in the initial moments, key gauges rebounded to the highest point in the day, clawing back in to the green zone. But, the benchmarks soon witnessed a trend reversal and started drifting to lower levels since the early afternoon trades. Hefty profit booking in most sectoral counters pulled the gauges to the lowest point in the session in mid noon trades, post which the bourses failed to regain any conviction and ended underperforming almost all the global markets. Finally the NSE’s 50-share broadly followed index Nifty, receded by close to a percent. Moreover, the broader markets which traded on an optimistic note for most part of the session succumbed to the selling pressure and went home with moderate losses. On the BSE sectoral space, the rate sensitive Realty and Bankex counters were the top laggards in the space and settled with around two percent. Profit booking was also evident in the Oil & Gas and Consumer Durables indices which plunged by around one and half a percent. On the other hand, the defensive counters like the FMCG and Healthcare bucked the somber trends and closed with around half a percent gains. Finally, the BSE Sensex shaved off 158.79 points or 0.98% to settle at 16,008.34, while the S&P CNX Nifty lost 46.20 points or 0.95% to close 4,805.10.

The US markets made a mixed closing on Tuesday, as Wall Street looked to a gathering of European finance ministers for signs of progress in stemming the region’s debt crisis. The markets rallied in early session as consumer confidence rose the most since 2003. The consumer confidence index surged to 56 from a revised 40.9 in October. The second economic data in as many days that indicated vibrant consumers in the US appear to be not worried about the growing problems in Europe. Investor feels that the US banks are not the epicenter of the crisis, but they are impacted by credit-default swaps, a form of insurance for European bonds, thought to be held by large US financial institutions.

However, Fitch Ratings revised down the outlook on the US credit rating to 'negative' yesterday, affirming the AAA sovereign rating. Also, Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the world’s biggest lenders. Besides, Moody's Investors Service warned that it could downgrade the subordinated and junior debt of 87 European banks, citing the governments' inability to support them amid the region's mounting sovereign-debt problems.

The Dow Jones industrial average gained 32.62 points, or 0.28 percent, to 11,555.60. The Standard and Poor’s 500 closed higher by 2.64 points, or 0.22 percent, to 1,195.19, while the Nasdaq composite lost 11.83 points, or 0.47 percent, to 2,515.51.

Crude prices extended their gains on Tuesday for the third straight session, supported by rebound in consumer confidence and geopolitical worries in Iran. The Conference Board survey found that US consumer confidence rose this month to the highest level since July. From Europe too, the news was good and Italy was able to sell bonds, somewhat easing worries about euro zone debt.

In Iran, the world's third-largest oil exporter, students angered at sanctions against the country for its nuclear program stormed the British embassy in Teheran and other British diplomatic sites.

Benchmark crude for January settled at $99.79 a barrel, rising $1.58, or 1.61 percent, after trading in a range from $97.23 to $100.15 on the New York Mercantile Exchange. In London, Brent crude for January rose for a second day and settled at $110.82 a barrel, gaining $1.82, or 1.67 percent on the ICE.