Markets to make a cautious start at the record high levels

The Indian markets extended their surge with Nifty crossing the psychologically important 8,000 level for the first time to mark its latest record high, after GDP growth in the first quarter surged to 5.7 percent, although there was skepticism over continuation of growth momentum for remaining of the fiscal. Today, the start is likely to remain cautious and some profit booking too can be expected, as the growth in eight core industries slowed down to 2.7 per cent in July after surging to a nine- month high of 7.3 per cent in June due to decline in production of crude oil, natural gas, refinery products, fertilisers and steel. Traders will be getting some support with Prime Minister Narendra Modi’s statement that his government is determined to push tax and financial sector reforms to improve business environment. Today, auto stocks are likely to keep moving higher, as all the major manufacturers have reported good sales numbers for the month of August. Car sales rose by 17.9% in August, driven by top three manufacturers -- Maruti Suzuki, Hyundai Motor India and Honda Cars India, marking the third straight month for a double-digit growth in car sales. There will be buzz in the mining and power stocks, as the government has told the Supreme Court that it “wants re-auction all of 218 coal blocks” declared as illegal allocation but sought its indulgence to exempt 40 of them which are functional and ready for the end use power plants.

The US markets remained closed, unable to give any cues to the other global markets. The Asian markets have made a mixed start with some of the indices outside Japan showing weakness dragged down by manufacturers. Japanese market was up as the yen weakened.

Back home, boisterous benchmarks once again showcased an enthusiastic performance, by rallying around a percentage point on Monday on the back of strong economic growth data for April-June quarter. Sentiments remained up-beat since start as key bourses made a gap-up opening and there appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength, as investors continued their hunt for fundamentally strong stocks. Frontline indices not only extended their rally for third straight session but also recorded their all time closing high, settling comfortably above their crucial 8,000 (Nifty) and 26,800 (Sensex) bastions as investors took to hefty across the board buying. Sentiments got bolstered after India’s economic growth accelerated to two-and-half year high of 5.7 per cent in the April-June quarter on the back of improvement in mining, manufacturing and services sector performance. Some support also came with Reserve Bank of India Governor Raghuram Rajan’s statement that India is now better prepared to handle the impact of any US interest rate increase because of signs its economy is improving. Moreover, investors shrugged-off some softness in manufacturing growth. The HSBC India Manufacturing PMI for the month of August slowed to 52.4 as against a July's 17-month high of 53.0. On the global front, Asian markets ended the session mostly in the green terrain, however, European markets after a positive start turned lower in early deals. Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. Sustained foreign institutional investor (FII) flows and participation of domestic mutual funds, which have bought close to Rs 60,000 crore since May 9, too supported the sentiments. FII inflow totaled Rs 44,426 crore ($7.4 billion), while mutual funds invested a net of Rs 14,012 crore in Indian equities between May 9 and August 28. Finally, the BSE Sensex surged by 229.44 points or 0.86%, to 26867.55, while the CNX Nifty soared by 73.35 points or 0.92% to 8,027.70.