Markets likely to make a cautious-to-soft start

The Indian markets remained volatile in the last session and after a smart recovery in mid day tanked on profit booking. The inflation worries kept haunting the investors and they once again opted to book profit. The things remain the same in the new week and the start today is likely to remain subdued. To add to the woes the Prime Minister's Economic Panel has further revised upwards the March-end inflation forecast to up to seven per cent from 6.5 per cent estimated earlier, in view of the higher than expected December numbers. The overall inflation for December, measured on the basis of wholesale prices, increased to 8.43 per cent in December, from 7.48 per cent in November. The rise in inflation is mainly due to increase in food prices. Anil Ambani group companies are likely to see some beating after the SEBI's ruling in Reliance Infra and RNRL case, though the junior Ambani has categorically denied of any ban by the market regulator and termed the settlement as voluntary. PSU oil companies might see some upmove with the decision of price rise during the weekend. Three state oil marketing companies, Indian Oil, Bharat Petroleum and Hindustan Petroleum, raised their price for petrol ranging from Rs 2.50 to Rs 2.54 per litre. Besides, Aviation Turbine Fuel too increased by 2 percent to Rs 48,764 per kilolitre from Jan 16.

Apart from this there will be lots of important result announcements, Axis Bank, Indusind Bank, Essar Oil, Power Finance, L&T and TCS will be among the many to announce their quarterly numbers.  

Meanwhile, with an aim to increase retail investors' participation in stock market, the market regulator Sebi is considering higher allocation of public offer shares for mutual funds, as retail investors prefer to invest through MFs because of risks being less in comparison to direct investment in stocks.

The US markets recovered on Friday and closed with gains supported by good earnings announcement and report of rise in retail sales. The Asian markets have made a mixed start of the new week with some of the indices trading lower by a quarter percent, weighed down by the hike in reserve requirement by China.

Back home, the equity indices in India were smashed to smithereens for the second straight day on Friday as dreadful December inflation numbers continued to torment the local equity indices after a tepid IIP numbers. Volatility surged to higher levels as profit booking remained the flavor of the day not only on Dalal Street but also on global front as most markets in Asian and Europe too lost traction. Intense sell-off in rate sensitive, commodities and infrastructure related shares ensured that the local frontline indices go home with losses of over one and half a percent points for the third time in the week. The NSE's 50-share broadly followed index, Nifty sulk around triple digit for the third time in the week, to breach the psychological 5,700 support level while the Bombay Stock Exchange's Sensitive Index or Sensex too shrank by over three hundred points to infringe way below the crucial 19,000 mark. In the broader markets, though the BSE's midcap and smallcap indices ended the day with cuts of around a percent, still they were comparatively better than their larger peers. In the meantime, the government released India's headline inflation numbers which rose significantly in the month of December, increasing the trouble of policy makers who have been forecasting a steady decline in the pace of prices rise over the second half of the fiscal. Earlier on the Dalal Street, the benchmarks indices failed to gain any kind of momentum initially as global cues remained weak given that Asian bourses traded in the red zone as investors opted to take profits off the table tracking the weak close in overnight US markets. The frontline indices remained range bound in the morning session but in the late morning trade the indices erased all the losses and managed to break in to the green as IT stocks supported the pull back. After trading in the positive territory for a couple of hours, selling pressure re-emerged as investors lacked conviction and they squared off positions. Eventually, the bourses succumbed to the pressure and tumbled like a house of cards to settle with deep cuts of over one and half percent as there was no short covering till last. Finally, the BSE Sensex plunged 322.38 points or 1.68% to settle at 18,860.44 while the S&P CNX Nifty plummeted 97.35 points or 1.69% to end at 5654.55. 

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