Markets to make a cautious start, may consolidate for yet another day

The Indian market snapped the gaining streak and ended lower after a choppy session. Today, the start is likely to be cautious and consolidation may linger for yet another day. There will be some concern from the rain front, as though the rainfall had revived significantly in the middle of last month, bouncing back from an alarming 43% seasonal deficit to barely 16% after a few weeks of heavy showers. But with rainfall dipping in the past two weeks, deficit has again widened again to 18% for the entire country. On the other hand there will be some respite on long pending GST, as the state Finance Ministers resolved to lower the threshold limit for imposing Goods and Service Tax (GST) from Rs 25 lakh to Rs 10 lakh, and asked the Centre to include the provision for GST compensation in the Constitutional Amendment Bill. There will be some action in mineral stocks as the government gave nod to increasing royalty rates on minerals including iron ore and bauxite.

The US markets went through a volatile trade after the release of the minutes of Federal Reserve's monetary policy meeting but managed mostly a positive close as it indicated its intention to keep the benchmark interest rate low for a considerable time. Most of the Asian stocks made a positive start after the US Federal Reserve signaled in minutes that it will continue to support the economy even as it ends its bond-buying stimulus. Chinese markets were in a bit somber mood ahead of the release of the preliminary reading of a private Purchasing Managers Index.

Back home, snapping their six-day winning streak, Indian equity benchmarks ended the sluggish day of trade with a cut of around half a percent as investors opted to book profits after markets hit fresh all-time highs in the previous session. Sentiments remained down-beat with Asian Development Bank (ADB) saying that a global failure to respond to climate changes could result in about 8.7 percent economic loss in India’s Gross Domestic Product (GDP) by 2100. Also, the Indirect tax mop up inched up merely by 3.9 percent in the April-July quarter of the current fiscal due to decline in custom duty and excise duty collections. The growth is far less than 25 percent annual increase envisaged in the Budget. Selling got intensified in last leg of trade as European markets made a sluggish opening. Back home, depreciation in Indian rupee too dampened the sentiments after the US dollar firmed up against other Asian currencies. The rupee was trading at Rs 60.73 at the time of equity markets closing as compared to the previous close of Rs 60.67. However, losses remained capped upto certain extent as foreign portfolio investors (FPIs) bought shares worth a net Rs 559.39 crore on Tuesday, as per provisional data from the stock exchanges. Meanwhile, banking space witnessed heavy selling with Axis Bank, ICICI Bank and SBI edged lower after reports suggested that the Union finance ministry has unearthed a scam involving these banks. Further, as per the reports, the ministry ordered a forensic audit and referred the case involving Oriental Bank to the Central Bureau of Investigation (CBI). Additionally, Oil marketing companies' stocks, BPCL, HPCL and IOC, which were trading upbeat for previous two trading session, succumbed to selling pressure in today’s trading session after reports suggested delayed prospect of deregulation of the nation's most consumed fuel, losses on sale of diesel have risen to Rs 1.78 per litre after dipping to an all-time low of Rs 1.33 a litre in first half of August. On the flip side, shares of pharmaceutical companies remained on a roll with most of the frontline stocks were trading multi-year highs on the bourses. A strong operational performance during the recently concluded quarter and weaker rupee against the dollar has fuelled the rally in pharma stocks. Finally, the BSE Sensex declined by 106.38 points or 0.40%, to 26314.29, while the CNX Nifty lost 22.20 points or 0.28% to 7,875.30.