Markets to consolidate, may witness some profit booking

The Indian markets after a good rally in early trade lost their momentum in final hours but managed a close of green in last session. While, the IT along with some rate sensitives’ moved higher, defensive stocks once again took the backseat. Today, the start is likely to be soft-to-cautious and the markets may trade sideways ahead of any conclusion to the European summit. The retail stocks may remain in somber mood on government’s backtrack on plans to let overseas retailers expand in India. Though, Finance Minister Pranab Mukherjee accepting the fact that the Indian economy was in difficult situation has said that there was no need to “panic” as the fundamentals were still strong. Also banking stocks may get some support with the report that Reserve Bank of India is considering a cut in cash reserve ratio, among other things, amid tight liquidity in the money market and rising demand for easing of monetary conditions to face economic slowdown.

The fertilizer stocks too are likely to remain in limelight as to control the high cost of importing potash and phosphates for the domestic fertiliser industry, manufacturers have asked for creation of a $20 billion sovereign fund to buy overseas assets of the minerals. The request comes in the backdrop of increasing raw material prices and the depreciating value of the rupee, which is down by over 15 percent in the year.

The US markets closed with marginal gains on Wednesday, though the trade remained cautious throughout the day but indices gathered momentum in final hours to snap the session on a flat note. There was some concern after the EU leaders argued over how to best handle the eurozone’s debt issues. The Asian markets have made a weak start and most of the indices are trading lower, ahead of the EU summit witnessing some profit booking.

Back home, it turned out to be a session of moderate gains for the Indian stock markets which came off the highest point of the day in dying hours of trade amid comments from the Union Finance Minister over India’s slowing growth, elevated inflationary pressure and swelling fiscal deficit. Nonetheless, the benchmark indices managed to amass around half a percent gains in the choppy session and completely recover the losses that the indices suffered on Monday. The frontline indices got firm support around the psychological 5,050 (Nifty) and 16,850 (Sensex) levels as they snapped the session around those levels after retreating twice from the crucial 5,100 (Nifty) and 17,000 (Sensex) levels. Sentiments remained sanguine for most part of the day even as the government bowed to intense pressure from within and outside and announced suspension of its decision to allow FDI in retail, bringing Parliament back to business after nine days of logjam. Investors added positions with conviction on hopes that the Reserve Bank of India will abstain from hiking key interest rates in its monetary policy review meet on December 16, buttressing buying interests in rate sensitive counters. Earlier on Dalal Street, the benchmark got off to a quiet beginning as marketmen remained cautious after a day’s break on Tuesday. However, the frontline indices jumped to higher levels in no time, tracking the Asian equity indices which largely exhibited optimistic trends. After trading on a firm note through mid morning trades, the key gauges pared gains in the late morning trades. But the sentiments once again got a lift in mid noon trades with the positive opening of European markets amid hopes that a concrete solution to the European problem may emerge in the forthcoming EU meet. Moreover, the broader markets too managed to snap the session in the positive terrain with marginal gains. On the BSE sectoral space, the information technology counter jumped by around one and half a percent, being the top gainer in the space followed by the Capital Goods pocket that climbed over half a percent. On the other hand, the defensive Healthcare and Consumer Durables counters settled with large cuts. Finally, the BSE Sensex gained 71.73 points or 0.43% to settle at 16,877.06, while the S&P CNX Nifty rose by 23.45 points or 0.47% to close at 5,062.60.

The US markets made a mixed closing on Wednesday, as investors crossed their fingers two days ahead of a European Union summit. In US, consumer borrowing rose in October to the highest level in two years, propelled by gains in non-revolving debt like auto and student loans. The data indicate consumers are relying more on credit to sustain spending as income gains fail to keep up with inflation and home prices drop.

Investors largely have held out hope this week that European Union leaders would reach agreement on a plan that would help the 17 nations that use the euro to further connect their economies. Those expectations were bolstered by comments from German Chancellor Angela Merkel supporting a stronger fiscal union among euro-zone members. Also, the ECB, which holds a policy meeting Thursday, is expected to cut interest rates. Investors are particularly interested in any clues the bank is willing to expand its bond-buying program to cap surging sovereign borrowing costs.

The Dow Jones industrial average gained 46.24 points, or 0.38 percent, to 12,196.40. The Standard and Poor’s 500 closed higher by 2.54 points, or 0.20 percent, to 1,261.01, while the Nasdaq composite lost 0.35 points, or 0.01 percent, to 2,649.21.

Crude prices declined on Wednesday on report of an unexpected rise in weekly inventories and growing concern about the euro zone. The Energy Information Administration (EIA) reported an increase in inventories of 1.3 million barrels for the week ended December 2, whereas analysts were estimating a fall of 1.3 million. Gasoline inventories grew by 5.1 million barrels, and supplies of distillates jumped by 2.5 million barrels.

Meanwhile, there is consensus among European Union states on the need for a ban on Iranian oil exports to the bloc, EU Energy Commissioner Guenther Oettinger said in Doha on Tuesday. Now, investors will focus on the Organization of the Petroleum Exporting Countries on December 14 in Vienna, Austria.

Benchmark crude for January delivery fell 79 cents, or 0.8%, to $100.49 a barrel on the New York Mercantile Exchange. In London, Brent crude for January lost $1.28, or 1.2%, to $109.53 a barrel on the ICE.