Markets once again likely to get a soft start after a day of break

The Indian markets made some recovery in last session, though they pared most of their gains in second half of trade on global concern and worries about the government’s ability to get the reform measures passed in parliament. Today, the start is likely to be soft and the markets may lose all their last session gains in early trade on weak global cues. Concerns of IMF revising India’s growth forecast down to 4.9 percent in 2012, along with the global downgrade, is likely to make the traders cautious. There will be buzz in the power sector as the government has notified the financial restructuring scheme for state-owned power distribution companies, the restructuring include conversion of 50 percent of their short-term debt into bonds backed by respective states. Also, the Prime Minister Manmohan Singh has said that the Government plans to offer affordable electricity to all households in the country in the next five years. However, the PSU oil companies are likely to remain under somber mood, as the oil ministry has ruled out any increase in price of diesel in the near future. Meanwhile, following the footsteps of IOC, BPCL and HPCL too have reduced petrol prices by 58 paisa and 57 paisa a litre, respectively.

The US markets declined for the third straight day on Tuesday weighed down by sharply lower forecast of slower global growth by IMF. However, after market hours, Alcoa the first Dow component to report the Q3 numbers delivered a surprise profit. Europe too remained in focus after German Chancellor Angela Merkel was greeted by protests over austerity measures in Greece. The Asian markets have made a weak start as concern of China’s economic slowdown and its territorial dispute with Japan were weighing on corporate earnings of both the nations. Japanese market was leading the losers pack after its major auto makers reported drops in China sales.

Back home, Indian equity markets staged a smart recovery after two sessions of drubbing, as value buying of select blue chip stocks activated snoozing bulls. The session was marred by volatility as the rally seemed to be fizzling out when investors started booking partial profits around the psychological 18,750 (Sensex) and 5,700 (Nifty) levels in afternoon trades. However, sanguinity prevailed till the end as investors continued piling- positions in select blue chip stocks. The sentiments also got some boost as private banks viz. ICICI Bank, Kotak Mahindra Bank and HDFC Bank gained on hopes that their quarterly earnings would prove resilient. The gains came despite a sharp downward revision in India’s 2012 growth forecast by the International Monetary Fund (IMF). It expects India’s GDP for 2012 at 4.9 per cent, perhaps the most pessimistic growth outlook by a global body. IMF lowered its forecast despite the government unleashing a series of reforms to attract foreign investment and boost business sentiment in the country. The government also undertook a series of steps to contain rising fiscal deficit in the hope of thwarting a downgrade by rating agencies. Some amount of support also came in from software counters, which rose to near a percent after the Indian rupee fell to a one-week low on October 8, 2012, and posted its biggest single-day fall in three months. Buying in FMCG space also supported the frontline indices as stocks like Marico, HUL and Gillette India edged higher on favourable outlook for Rabi or winter crop following wide-spread rains in August and September. However, the gains remain capped as Auto stocks ran out of steam after Finance Ministry slashed rebates paid on certain types of exports. Auto makers get refunded a portion of local taxes paid for components used in vehicles, motorcycles or auto parts that are sold overseas. The gains also remain limited as telecom stocks fell up to 4 percent after an Empowered Group of Ministers recommended a one-time fee on existing operators for spectrum they hold beyond 4.4 MHz. Finally, the BSE Sensex gained 84.38 points or 0.45% to settle at 18,793.36 while the S&P CNX Nifty rose by 28.60 points or 0.50% to end at 5,704.60.