Markets to continue the somber run with a mildly soft start

The Indian markets once again returned to their declining path with a cut of about a percent after S&P warned that India still faces a one-in-three chance of a credit rating downgrade within the next 24 months. The global economic worries too pressurized the markets. Today, the sluggishness is likely to persist with no positive triggers in sight and global cues too are not that good as Standard & Poor’s has cut Spain's sovereign credit rating to BBB-minus, just above junk territory. Though, there will be some solace with US Federal Reserve chairman Ben Bernanke saying that India is gaining importance among the G20 countries. Ben Bernanke has also said that India is becoming an important player on the global stage. Auto makers are likely to keep reeling in red after SIAM drastically reduced its car sales forecast to 1-3% against the previous projection of 9-11%. However, the ailing IT stocks may get some upmove on a report that Indian IT spending will reach $71.5 billion in 2013, growing 7.7% from the $66.4 billion forecasted for 2012. There will be buzz in the cable TV companies after the country’s largest direct-to-home (DTH) television content provider, Dish TV triggered a price war for the DTH bound subscribers in the four metros.

The US markets suffered sharp cuts on Wednesday, a day after the earnings season opened with Alcoa quarterly numbers and Chevron saying profits would fall sharply in its most recent period. Though there was some respite with Federal Reserve’s Beige Book report saying that the economy was expanding modestly. Most of the Asian markets have made a somber start, though the cuts are marginal but the report that Japanese machinery orders fell in August was weighing down the sentiments.

Back home, key domestic benchmarks resumed their southward journey, after a session of halt, on Wednesday as investors opted to take profit off the table amid slew of negative triggers from global as well as from domestic front. The NSE’s Nifty barely managed to end tad above its psychological 5,650 level while, BSE’s Sensex lost its crucial 18,650 mark as investors offloaded their positions after global ratings agency Standard & Poor’s (S&P) warned of a significant chance of downgrading India’s debt rating in the future. The rating agency underscored that downgrade was likely if growth prospects dimmed, external position deteriorated; political climate worsened or pace of fiscal reforms slowed. It also said that it sees India’s FY13 fiscal deficit at 6 percent of GDP as against the government’s projection of 5.1 percent. In April this year, S&P slashed India's sovereign outlook to ‘negative’, putting at risk the country's current rating of ‘BBB-’, the lowest investment-grade rating. The sentiments also remain dampened after Auto industry body SIAM slashed the FY13 car sales growth forecast from its previous estimate of 9-11 percent growth, citing high interest rates and slowing economic growth. SIAM also cut its motorcycle sales growth for FY13 to 5-7% from 11-13% earlier, and commercial vehicles sales growth to 3-5%, from 6-8% earlier. The traders also remained sidelines on concern of IMF revising India’s growth forecast down to 4.9 percent in 2012, along with the global downgrade. Depreciating rupee too spread misery into the markets as it touched 53.15 against the dollar in the afternoon trade as demand for the American currency by importers persisted. The global cues too deteriorated the sentiments as European counters traded in the green in early deals amid concerns about the outlook for global growth. The major blow came in from the realty space, which tumbled over four and half a percent after Arvind Kejriwal released more evidence of links between DLF, Haryana government and Robert Vadra. The social activist-turned-politician has also named two other realty players - Indiabulls and BPTP - for having close links with politicians. Telecom stocks like Idea Cellular, Bharti Airtel, Reliance Communication and MTNL extended yesterday’s losses triggered by the Empowered Group of Ministers’ decision to impose a one-time fee on existing telecom operators. Finally, the BSE Sensex lost 162.26 points or 0.86% to settle at 18,631.10 while the S&P CNX Nifty declined by 52.45 points or 0.92% to end at 5,652.15.