Markets to remain in somber mood on soft global cues

The Indian markets reacted negatively to the weak global cues and disappointing domestic macro data in last session, with major indices losing around a percent for the day. Today, the start is likely to be somber tailing soft global cues and markets may see further cut in early deals. Traders will be under pressure with Reserve Bank of India governor Raghuram Rajan giving the signal that he'll keep interest rates unchanged at the month-end monetary policy announcement. Rajan has said that though the inflation is coming down but still have some way to go before it can be declared that we are out of the woods. Also, continuing the downtrend, India's export growth slipped to 2.35 per cent at $26.95 billion in August, pushing up trade deficit to $10.83 billion, as imports of gold surged 176 percent after policy makers eased shipment curbs. However, there will be some solace with Paris-based think tank OECD projecting 5.7 percent growth for the Indian economy this year even as global recovery continues at a moderate pace. There will be some buzz in the capital goods stocks, as the Cabinet Committee on Economic Affairs, approved over Rs 930-crore scheme to enhance competitiveness in the capital goods sector with an aim to boost the economy. On implementation, this scheme will attempt to make the Indian capital goods sector globally competitive. The IT stocks are likely to remain under pressure showing global impact.

The US markets made a mixed closing after showing a lackluster trade in the last session with Technology stocks witnessing significant weakness, amid uncertainty about the monetary policy outlook ahead of the Fed's announcement on Wednesday. The Asian markets have made mostly a lower start on anxiety about US Fed’s interest rates review. Japanese market too has lost pace after gaining for five straight sessions.

Back home, Monday’s trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 26,850 (Sensex) and 8050 (Nifty) levels. Sentiments remained down-beat since beginning of the trade amid weak global cues and disappointing industrial growth 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. Also, investors shrugged off better-than-expected wholesale price index (WPI) for the month of August. India’s main inflation gauge, based on monthly WPI, stood at 3.74% for the month of August as compared to 5.19% in the previous month and 6.99% during the corresponding month of the previous year. However, June inflation figures were revised upwards to 5.66% from 5.43% earlier. Moreover, India’s retail inflation fell to 7.8 per cent in August from 8.0% in July. Meanwhile, Ficci’s Survey indicated 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. Global cues too remained sluggish with European markets making a sluggish start, while the Asian markets ended in the red. Back home, depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 61.08 per dollar at the time of equity markets closing compared with its previous close of 60.65. Meanwhile, shares of metal companies edged lower on weak Chinese economic data. China’s factory output grew at the weakest pace in nearly six years in August raising fears the world's second-largest economy may be at risk of a sharp slowdown. On the flip side, stocks related to realty and infra counters edged higher on 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. Finally, the BSE Sensex plunged by 244.48 points or 0.90%, to 26816.56, while the CNX Nifty declined by 63.50 points or 0.78% to 8,042.00.