Markets likely to get a cautious start; European development eyed

The Indian markets slumped in last session, breaching their important support levels. Barring the defensive FMCG and technology sectors none of the sectoral gauges showed any resilience. Today, the start is likely to remain cautious and the trade may remain range-bound, all eyes will be on the Europe, any positive development in the region will boost the morale of the investors across the globe. The auto companies are likely to get some relief on buzz that the government may not go for slapping an additional tax on diesel cars instead it is thinking of hiking the prices of diesel to generate revenues. However, the gloom in the two-wheeler sector is likely to weigh on the companies as sales of two-wheelers fell for the first time in 42 months in Augustdue to a combination of surging petrol prices and high interest costs. There is also likely to be buzz in the markets, as the government has said that it is reviewing the tax treaty with Mauritius to prevent misuse and to strengthen tax information exchange mechanism between the two nations.

The PSU sector will be in limelight as well, on report that MMTC and Neyveli Lignite are going to get disinvestment approval next week from cabinet. The government is planning to divest 9.33% stake in MMTC and 5% stake in Neyveli Lignite. About 15 PSUs are on the divestment list this year.

The US markets once again made a mixed closing on Wednesday. The trade remained choppy and traders avoided making any big bets ahead of a crucial meeting of the European Central Bank, there were some reports that European policymakers would unveil a bond-buying plan to support the debt-troubled euro zone economies. The Asian markets have made a mixed start, though most of them were trading in green ahead of the ECB meeting which can announce bond-buying program. The Chinese market was up despite Goldman Sachs Group Inc. cutting its growth estimates.

Indian key benchmarks resumed their southbound journey on Wednesday with Nifty snapping the session below the key 5,250 mark for the first time since August 3, 2012. The bourses traded in the red throughout the day as sentiments was hammered badly by weak global cues and sharp cut in the rupee, which hit a two-week low against the dollar on Wednesday. The undertone remained cautious as the government struggled to implement promised reforms amid stiff resistance from allies and opposition parties. In addition, the highly controversial CAG report on coal block allocations has paralyzed the Parliament during the monsoon session. The sentiments also got bashed as there is looming threat of a possible downgrade of India’s sovereign ratings in the absence of meaningful reforms. Meanwhile, Indian private sector services business expanded at the fastest pace in six months in August, driven by the strongest growth in new business since February and increasing optimism about the future but, turned out as non event as selling got intensified after banking shares witnessed profit taking at higher levels on concerns of rising non-performing assets in the wake of sluggish economy and government’s reduced fiscal flexibility. At the same time, Fitch Ratings said, fiscal 2013 impaired assets across the banking sector may exceed its initial forecast as the economy slows. The rating agency added that absolute cumulative gross NPLs reported at India's five largest banks - accounting for over a third of the system assets - increased by around 62 percent in the first quarter of FY13. The sentiments also weighed by selling in Metal space, which lost the most by about three percent on rising concerns of demand slowdown in the wake of sluggish economy both local and global. Stocks of Tata Steel, Hindalco, Jindal Steel & Power, Sesa Goa, Sterlite Industries all corrected by 2.50-5 percent. However, some respite came from FMCG space which gained by over half a percent on hopes that the revival of monsoon rains across the country would help improve farm income aiding growth in rural spends. The BSE Sensex lost 127.53 points or 0.73% to settle at 17,313.34, while the S&P CNX Nifty declined by 48.30 points or 0.92% to close at 5,225.70.