Markets to make a soft start on sluggish global cues

The Indian markets recovering from their intraday fall ended last session with good gains, traders were concerned with Reserve Bank of India (RBI) continuing its vigil on inflation and keeping repo rate unchanged at 8%. Though, RBI is unlikely to cut rates over the next couple of quarters, but showed more confidence on achieving its January 2015 target of 8% inflation and helped the markets recover. Today, the start is likely to be soft on sluggish global cues, traders will remain cautious and will react on earnings amid geopolitical tension. Meanwhile, on a report that the failure to ink the WTO's trade facilitation agreement (TFA) may cost the global economy $820 billion and 16 million in terms of new jobs, industry body CII, backing the government stand has said that due importance should be given to trade facilitation, food security and LDCs issues while taking forward the outcomes of Bali Ministerial. Sugar stocks will keep buzzing, as majority of private sugar producers in Uttar Pradesh may suspend cane crushing next season starting October. However, there will be some support to the markets after the government said that the proposed new indirect tax regime, Goods and Services Tax, is likely to be introduced shortly. Minister of State for Finance Nirmala Sitharaman has said that Centre is consultation with states had decided to phase out CST to facilitate introduction of GST.

There will be lots of important result announcements to keep markets buzzing. Adani Ports, Adani Power, Amara Raja, Apollo Tyres, Gati, Glaxosmithkl Consumers, IDBI Bank, Jindal Steel and Tata Teleservices are among many to announce their numbers.

The US markets slumped again after a day of break and the Dow suffered triple digit cut on worries about the outlook for monetary policy, after the service sector activity expanded at a notably faster rate in July. The Asian markets following the US cues have made a weak start amid escalating tensions in Ukraine.

Back home, extending their previous session’s jubilation, Indian equity benchmarks ended the volatile day of trade with a gain of 3/4 of a percent on Tuesday. Earlier, markets made a positive opening but entered into red terrain after the central bank has kept the short-term lending rate or repo rate unchanged at 8 per cent and the cash reserve ratio static at 4 per cent. Though, the RBI has slashed the statutory liquidity ratio (SLR) by 0.5 per cent to unlock about Rs 40,000 crore into the system. Sentiments also remained dampened after the activity in Indian services sector, which accounts for around 60% of Indian GDP, slightly eased in the month of July due to slowdown in new business orders. The HSBC services Purchasing Managers’ Index (PMI), based on the survey of around 350 private service sector companies, fell to 52.2 in July from17-month high at 54.4 in June. But markets staged a smart bounce-back from day’s low point after Raghuram Rajan, post the release of policy document, assured investors that short-term risks are more balanced currently and RBI has room to cut rates if disinflation continues. Raghuram Rajan further added that RBI will not hold rates high longer than necessary, which has remain an overhang on markets for quite some time now. Moreover, a slight cut in interest rates is important as it will help revive investment cycle and push GDP growth. Buying got intensified in last leg of trade after European markets edged higher in early deals, however, Asian markets shut shop mostly in the red. Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Frontline indices managed to settle near intraday high levels with Sensex surpassing its crucial 25,900 bastion and Nifty ended above its crucial 7,700 mark. Appreciation in Indian rupee against dollar too aided the sentiments. Rally in real estate and automobile counters too aided sentiments after the RBI lowered the SLR by 0.50 basis points half to 22% to free up more money for lending. Finally, the BSE Sensex surged by 184.85 points or 0.72%, to 25908.01, while the CNX Nifty soared by 62.90 points or 0.82%, to 7,746.55.