Markets to make a soft start of the new week on weak IIP data

The Indian markets showed some bounce back in the last session and bourses recovered some of their losses though trade remained in range. Today, the start is likely to be soft-to-cautious and traders will be reacting to the mixed macro data announced during the weekend, while retail inflation fell to 7.8 per cent in August from 8.0% in July, the industrial production declined to 0.5 per cent in July compared to an upwardly revised 3.9 per cent growth in June. However, there will be some solace from a Ficci Survey, which has said that India's GDP will grow at 5.6 percent during 2014-15 and economic activity is expected to continue with this momentum in the second half of the current fiscal. Also, there is a report that Industrial and infrastructure project proposals will get security clearance within 12 weeks as the Home Ministry has streamlined the process by issuing a detailed guideline in this regard. There is some good news for the companies engaged in e-commerce, as the government is likely to modify the Information Technology Act, 2000 to remove legal obstacles in e-commerce transactions. There will be some scrip specific action based on advance tax payments for second quarter.

The US markets ended lower in last session and traders remained cautious ahead of the Fed’s meeting next week. The Asian markets too have made mostly a somber start with some of the indices witnessing cut of over half a percent in the early hours, after weak Chinese factory and retail data announced during the weekend, added to the evidence that a slowdown is deepening.

Back home, snapping three days of continuous fall, Indian equity benchmarks ended with a gain of around quarter a percent with frontline gauges recapturing their crucial 27,050 (Sensex) and 8,100 (Nifty) levels. Domestic markets traded extremely choppy throughout the session where key indices slipped several times below the neutral line only to recover later. Nevertheless, buying in last leg of trade mainly aided the sentiment at Dalal Street. Meanwhile, investors remained on sidelines ahead of important macro data -- IIP for the month of July and CPI inflation data for the month of August -- scheduled to be released in the evening. IIP for July is likely to fall to 1.7 percent month on month primarily due to weak core sector data, while the CPI for august is likely to soften to 7.7 percent. However, gains remained capped as some cautiousness crept in with RBI Governor Raghuram Rajan’s statement that abrupt reversal of low interest rates globally could create substantial amounts of damage and that it should be done in predictable and careful way. On the global front, European counters made a sluggish start, while Asian markets ended mixed. Back home, India recorded its heaviest spell of monsoon rains in 2014 in the past week, logging in surplus for the second straight week, raising hopes of a delayed retreat of the four-month season. Appreciation in Indian rupee too aided the sentiments. Meanwhile, buying witnessed in infra stocks, as the ministry of urban development has prepared a draft concept note on the smart city scheme. Various states will have to submit proposals based on the reference framework to the central government. Stocks related to auto space too remained on buyers’ radar on report that the government is looking at the proposal for extending excise duty concessions to the automobile sector beyond December. It is also reported that the Heavy Industry Ministry is likely to send a proposal to Finance Ministry regarding extension of excise duty concession till March 31, 2015. On the flip side, pharmaceuticals stocks extended previous sessions’ decline, which were triggered by reports that Sun Pharma’s manufacturing facility in Halol, Gujarat is undergoing a surprise inspection by the US Food and Drug Administration (USFDA). Finally, the BSE Sensex gained 65.17 points or 0.24%, to 27061.04, while the CNX Nifty added 19.80 points or 0.24% to 8,105.50.