Deteriorating dreams!

"Don't be pushed by your problems. Be led by your dreams." – Anonymous.

The market behaviour is turning nightmarish with Indian indices falling for five straight sessions. Worse, all indications are pointing to another weak opening given the deteriorating macro-economic backdrop (local and global). For the Nifty, 5000 is a crucial level to keep on one’s radar as volatility escalates and uncertainty mounts.

The Nifty is currently trading below 10 WMA of 5077. The 61.8% retracement from the up move (4726 to 5400) is placed at 4980. So, there is a chance of a technical bounce from here on. However, one must remain vigilant and take a measured approach.



Lingering concerns about the eurozone debt crisis will continue to affect market sentiment. US stocks slid with financials pacing the fall after Fitch Ratings warned that American lenders could be hit if the euro area mess deepens. The CBOE VIX is up 7%.

European benchmarks closed mixed in a choppy session. The undertone was hit by BOE’s warning that economic outlook has worsened due to the credit crisis. Asian markets are mostly down. But the Chinese market is showing some resilience.

The broader market has witnessed some pain in the past few sessions. Its anybody's guess whether the fall in the Small- and Mid-Cap shares is over. One must be very careful while dealing in these group of scrips. It is best to avoid these counters for the time being.

FIIs were net sellers of Rs 4.88bn (provisional) in the cash segment on Wednesday, according to NSE data. The domestic institutional institutions (DIIs) were net buyers of Rs 2.77bn on the same day.

The foreign funds were net buyers of Rs 2.84bn in the F&O segment on Wednesday, NSE data shows.

FIIs were net sellers at Rs 3.77bn in the cash segment on Tuesday, according to SEBI web site. Mutual Funds were net sellers at Rs 351mn on the same day.

Keep an eye on the Rupee, which has declined to a 32-month low versus the US dollar.

Patni Computer will be in focus after iGate said it would delist the company.

Global Data Watch: UK retail sales, EU construction output, US building permits, US housing starts, US weekly jobless claims and Philadelphia Fed Manufacturing Survey (Nov).

Asian Markets on Thursday:

Asian equity markets were trading mostly lower, tracking overnight losses in the US markets after Fitch Ratings said that a worsening eurozone debt crisis poses a serious risk to American banks.

In addition, worries about the euro area debt troubles continued to depress sentiment across the region.

The MSCI Asia Pacific Index dropped 0.5% at 115.71 as of 09:50 a.m. in Tokyo. About two stocks fell for each that rose. The index was headed for the lowest close since Oct. 20. It had dropped by 2.4% last week.

The Nikkei in Japan was down 0.3% at 8,436. The Hang Seng in Hong Kong lost ~0.9% at 18,789 while the Shanghai Composite index in China was static at 2,465. The Kospi in South Korea rose ~0.4% at 1,863 while the Taiex in Taiwan was down ~0.2% at 7,370.

The Straits Times in Singapore was down ~0.7% at 2,788. The S&P/ASX 200 index in Australia was up ~0.2% at 4,257 while the NZX 50 index in New Zealand was flat at 3,280.

US stock indices slipped yesterday after Fitch said that further turmoil in Greece, Ireland, Italy, Portugal and Spain poses a serious risk to American lenders. The risks are currently manageable, the ratings company said.

Stocks also fell after Bank of England Governor Mervyn King said that Britain faces a markedly weaker economic outlook.

Energy companies in Asia rose after crude for December delivery rose $3.22 to $102.59 a barrel on the New York Mercantile Exchange, the highest settlement since May 31.

NYMEX crude oil futures rose more than 2%, breaking through the $100-a-barrel mark for the first time since June as investors cheer news about a pipeline alleviating supply bottlenecks.

Asian shares have been hit this week by worries that the euro area debt crisis was spreading to the core members of the region amid rising bond yields for some nations.

With Italy's benchmark sovereign yield above the key 7% level, concerns about European defaults have only increased. The yield on Spain's 10-year government bond has also climbed lately.

However, non-German European government bonds rebounded on Wednesday, sending yields lower.

Spain faces a weekend general election, which polls show the ruling Socialist party is expected to lose.

In fact, even the top-rated eurozone nations like Austria, the Netherlands, Finland and France have seen some pain in the bond market.

The euro has reversed course to slide below the $1.35-mark again after Fitch warned about the potential adverse impact of euro-zone’s debt crisis on the US financial sector.

Greece's budget deficit could exceed 9% of GDP this year compared with an 8.9-9% estimate as the economy is expected to sink deeper into recession, a senior government official said.

US Markets on Wednesday:

US equity benchmarks closed lower on Wednesday after Fitch Ratings warned of potential troubles for American banks due to their exposure to eurozone sovereign debt.

The Fitch report sparked a broad sell off in the afternoon. US stocks had been buffered from larger fall owing to positive economic data out of the US and the price of crude.

Closing near session lows, the Dow Jones Industrial Average lost 190.57 points, or 1.6%, to end at 11,905.59.

The S&P 500 Index declined 20.89 points, or 1.7%, to close at 1,236.92, with banks hardest hit among its 10 sectors.

The Nasdaq Composite Index shed 46.59 points, or 1.7%, to shut shop at 2,639.61.

For every stock rising more than three fell on the New York Stock Exchange, where 918 million shares traded. Composite volume topped 4 billion.

The dollar rose against the euro and British pound, but lost ground versus the Japanese yen.

Oil for December delivery added $3.22 to $102.59 a barrel.

Gold futures for December delivery fell $7.90 to $1,774.30 an ounce.

The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.00% from 2.06% late Tuesday.

Stock indexes declined further in the final hour after Fitch said that unless the Eurozone debt crisis is resolves in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen.

US stock indexes briefly erased losses on speculation that the Federal Reserve might assist the European Central Bank (ECB) in its efforts to curb Europe’s debt trouble.

The brief relief came after reports quoted Boston Fed President Eric Rosengren as saying that Europe’s troubles might necessitate coordinated action by the Fed and the ECB.

US stocks had been lower after the Bank of England said that prospects for Europe’s economy had worsened.

Yields on sovereign debt continued to hit record highs in more countries around the eurozone. Italy's 10-year bond yield stayed above the 7% Wednesday, following a lackluster reading on third-quarter eurozone economic growth.

Meanwhile, Italy's new prime minister Mario Monti was sworn in Rome. Monti, who will also take over as temporary finance minister, will present his government's plans to the Italian Senate on Thursday.

In Athens, Greece’s new coalition government won a confidence vote in parliament, as expected. Prime Minister Lucas Papademos vowed to quicken the pace of long-term reforms and ensure the nation receives a huge new bailout.

Economic reports showed a rise in confidence among homebuilders for the second straight month, while US industrial production jumped more than expected.

Inflation declined in October, the government reported. Consumer prices rose at a 3.5% annual rate in October, due to declines in energy costs. Analysts expected inflation for the month to stay flat.

Core inflation, excluding volatile food and energy prices, ticked up 0.1% in October, after rising the same amount in September. The increase was in line with expectations.

Figures from the Federal Reserve had industrial production climbing 0.7% in October, illustrating the manufacturing sector is participating in economic growth in the final quarter of 2011.

The National Association of Home Builders/Wells Fargo index of builder confidence rose in November to the loftiest level since May 2010.

Shares of semiconductor company Rambus lost more than half their value, after the company failed to convince a jury Wednesday that its competitor Micron Technology committed antitrust violations. Micron's shares jumped on the news.

Target reported quarterly earnings before the opening bell that blew past expectations, with same-store sales rising 4.3%.

Shares of Abercrombie & Fitch slid after the apparel retailer posted an increase in quarterly earnings that widely missed expectations. The company said its results were impacted by higher costs and economic uncertainty.

European Markets on Wednesday:

European stock indices closed mixed on Wednesday at the end of a volatile session with investors' attention split between rising bond yields and the Bank of England's downbeat inflation report.

The Stoxx Europe 600 index ended flat at 237.04. It fell 1.6% over the previous two days.

France’s CAC-40 index rose 0.5% to 3,064.90, while Germany’s DAX 30 index fell 0.3% to 5,913.36.

In London, the FTSE 100 index was down 0.2% at 5,509.02 after the Bank of England said that the prospects for the UK economy have worsened and activity could be broadly flat until the middle of next year.

"Concerns about the sustainability of the euro area have intensified, and continue to affect market sentiment, asset prices and bond yields," said Mervyn King, the Bank of England’s governor.

In Italy, the FTSE MIB index gained 0.8% to close at 15,419.20.

Italy’s 10-year government bond yield rose above the 7% level. The yield had fallen earlier amid reports of heavy buying of Italian debt by the European Central Bank.

Shares of UniCredit SpA rose 1.4% after a choppy trading session.

Moody’s Investors Service put UniCredit’s debt ratings on review for possible downgrade.

Separately, UniCredit CEO Federico Ghizzoni told Italian newspaper Corriere della Sera that he will ask the ECB to explore the possibility of widening the types of collateral it accepts in return for loans as a way of broadening access to central-bank funding.

Vivendi rallied and was the biggest gainer in the CAC-40. The entertainment and telecom group reported a 35% drop in third-quarter net profit to 241 million euros ($324 million), as sales slipped 1.6% to €6.78 billion.

Vivendi said it now expects its 2011 adjusted net profit to be above €2.85 billion due to a higher tax bill in France, compared with a previous forecast of above €3 billion. Vivendi confirmed that it will increase its dividend for the fiscal year.

Shares of Infineon Technologies dropped 3%. The German chip maker said that it has observed increasing caution from customers and it now expects fiscal first-quarter revenue to drop around 10% from the preceding three months.