Markets to get a green start supported by good IIP data

The Indian markets remained under pressure in last session and suffered sharp cuts, reacting to the budget announcements. Today, the start is likely to be in green tailing the regional gauges and traders will be reacting positively to the better than expected industrial output data. Index of industrial production (IIP), expanded for the second straight month to a 19 months high of 4.7% in May. However, there still be some budget related industry specific action in the markets with telecom stocks remaining under pressure, as the industry body COAI has said that 10 per cent duty imposed on telecom products that fall outside the WTO pact will result in added capex burden of Rs 1,000 crore. The budget 2014-15 proposed imposing 10 per cent duty on telecom products not covered under Information Technology Agreement (ITA) 1 of WTO to support local producers. Meanwhile, government has said that the Budget 2014-15 has brought about clarity in tax policies and it will walk the difficult path to bring growth impulses back into the economy amidst fiscal constraints. There will be some buzz in the steel stocks too, on report that India's steel consumption grew by a mere 0.7 percent during the first quarter of current fiscal to 18.82 million tonnes (MT). However, production of finished steel grew by 1.5 percent during the period at 21.86 MT over the same period last year. The sugar stocks too may see some action on industry body ISMA’s estimate that the total sugarcane acreage of the country in the 2014-15 sugar season would be around 52.30 lakh hectare, about two per cent less than last year.

The US markets showed modest gains in last session on bargain hunting following the notable pullback seen earlier this week, though the week ended in red on European concern. The Asian markets have mostly made a green start on course for their first gain in five days.

Back home, extending their southward journey for the fourth straight day, Indian barometer gauges witnessed blood bath on Friday with both the major indices losing around one and a half percentage point and ending below their crucial 7,500 (Nifty) and 25,100 (Sensex) levels. Investors remained on sidelines ahead of index of industrial production (IIP) data for the month of May to be released later in the day and consumer price index (CPI) data for the month of June to be released on July 14, 2014. The industrial output is seen rising 3.8% in May 2014, higher than 3.4% growth in April, while Consumer price inflation probably would have eased to 7.95% last month, down from May’s 8.28%. Sentiments also remained down-beat on report that the overall rainfall stood at around 45%, below the seasonal average, raising the chances of draught in five years. Uncertainty about Narendra Modi government’s ambitious fiscal deficit target too triggered some profit-booking. The new government unveiled its maiden budget which sought to revive growth and curb borrowing, provided no clarity on the way to reduce the fiscal deficit and restore investor confidence. Meanwhile, investors shrugged off better-than-expected first quarter numbers posted by Software major Infosys. India’s second largest information technology (IT) services company posted a 21.6% year-on-year growth in net profit at Rs 2,886 crore, and a 13.3% year-on-year growth in revenues at Rs 12,770 crore. On the global front, European markets traded in fine fettle in early deals on Friday, while Asian markets ended mostly in the red. Back home, selling was both brutal and wide-based as most of the sectoral indices on BSE ended in the red. Counters, which featured in the list of worst performers, included realty, capital goods, power, metal and public sector undertaking. Meanwhile, banking shares mainly PSUs fell for seventh straight session, touching over one-month low as the government has decided to reduce its stake in the public sector banks, enabling the lenders to raise equity from public though it will continue to the hold majority stake. Additionally, realty stocks which emerged as budget day darlings after FM proposed tax incentives for REITs, reversed all their gains, ended with losses on profit-booking. On the flip side, the software and technology shares ended positive after Infosys reported a better-than-expected consolidated net profit for the first quarter ended June 30, 2014. Finally, the BSE Sensex lost 348.40 points or 1.37%, to 25024.35, while the CNX Nifty declined by 108.15 points or 1.43%, to 7,459.60.