Expiry of September F&O contracts to trigger volatility

The government's next policy moves after easier foreign investment rules announced this week will dictate near term trend on the bourses. Volatility may remain high as traders roll over positions in the futures & options (F&O) segment from the near month September 2012 series to October 2012 series. The September 2012 F&O contracts expire on Thursday, 27 September 2012. Shares of sugar firms will be focus on buzz the government will announce reduction in subsidy on sugar made available to below-poverty-line (BPL) consumers under the public distribution system. The measure expected to be announced after a Cabinet Meeting on Tuesday, 25 September 2012, is aimed at reducing the government's good subsidy burden, reports suggest. Shares of power generation, power distribution and power transmission firms will be in focus on buzz that the government will announce next week measures aimed at improving the finances of power utilities. Pharma stock will be focus on buzz that the government is set to ease foreign direct investment norms for the pharmaceutical sector. The outlook for winter crops has improved due to the annual monsoon rains' delayed withdrawal, which has provided crops with badly needed moisture after months of insufficient rainfall. The monsoon rains usually leave India by 1 September, but this year rainfall began to pick up in late August, after insufficient rain in preceding months forced four major agricultural states to declare a drought. The rains are now expected to begin departing from northwest regions by Monday, 24 September 2012, the state-run India Meteorological Department said on 19 September 2012. The overall rainfall deficit for the monsoon season has narrowed to 5% below the long-term average from around 13% in July and 29% in June. The late rain was unexpected. In fact, weather department had forecast that an El Nino would emerge in September. The weather event usually limits rainfall in India. Farm Secretary Ashish Bahuguna on 19 September 2012 said that the late rainfall would mitigate damage to summer crops caused by the earlier rain shortfall, but wouldn't result in a dramatic improvement. The government will on Monday, 24 September 2012, release its latest crop estimate for the year that started on 1 July 2012, Mr. Bahuguna said. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. On the global front, the Spanish government is expected to announce on Friday, 28 September 2012, the results of a review of its banking system, which will also include how much the European Stability Mechanism needs to recapitalize those banks.