Markets to make another somber start on sluggish global cues

The Indian markets closed marginally in red in last session, after going through choppiness throughout the day. Today, the start is likely to remain somber on weak global cues and trade will be cautious initially ahead of the Reserve Bank of India’s (RBI) fourth bimonthly policy review. Though, the RBI is widely expected to keep interest rates on hold as Governor Raghuram Rajan pursues his quest to conquer inflation. Consumer price index (CPI) based retail inflation eased to 7.8 per cent in August, while the governor has set a target for CPI inflation at 8 per cent by January 15 and 6 per cent by January 2016. Meanwhile, Finance Secretary Arvind Mayaram suggested that the economic conditions were becoming favourable for cut in interest rates. There will be some buzz in the markets from the FII front with Prime Minister Narendra Modi pitching for investments from some of the largest American corporations with the promise of a stable tax policy and an assertion that he wants to convert the Supreme Court ruling on coal block allocation into an opportunity to move forward and 'clean up the past'. There will be some somberness in the companies having SEZ, as the government has cancelled approvals of nine special economic zones on ground of no satisfactory progress.  

The US markets once again ended in red in last session, although the major averages made substantial recovery from their initial fall but remained concerned about the impact of protests by pro-democracy activists in Hong Kong. The Asian markets have mostly made a lower start with leaders of Hong Kong’s protests setting an October 1 deadline for their demands to be met and Chinese manufacturing gauge missing estimates.

Back home, erasing all the early gains, benchmark equity indices ended the volatile day of trade slightly in the red on Monday, as investors opted to be on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review. Though the street is expecting the governor to keep the rates unchanged this time. After a positive start, markets traded in very tight band throughout the session, but selling pressure which crept in the last hour of trade mainly led to slightly negative close of domestic markets. Sentiments remained dampened on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 1133.64 crore on September 26, 2014. However, losses remained capped with Finance Secretary Arvind Mayaram saying that growth rate in the current fiscal will be in range of 5.5-5-9 per cent, exceeding Standard and Poor’s estimate of 5.5 per cent. Some support also came in from report that with chances of mopping up better revenues than estimated, the Government has cut down its market borrowing by Rs 8,000 crore at Rs 5.92 lakh crore. Lower borrowings will mean that more money will be available for banks to lend to the private sector and individuals. Also, private equity investment in India is likely to touch a staggering $12 billion in 2014 primarily on account of reform measures taken by the government at the Centre. On the global front, European markers traded lower in early deals, while Asian markets remained volatile following political unrest in Hong Kong. Back home, depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 61.43 per dollar at the time of equity markets closing compared with its previous close of 60.14 due to month-end dollar demand from importers. Selling in metal and mining stocks too dampened the sentiments as latest data reaffirmed slowdown in China, the world's largest consumer of steel, copper and aluminum, while banking counters too succumbed to selling pressure ahead of RBI’s credit policy. Finally, the BSE Sensex declined by 29.21 points or 0.11%, to 26597.11, while the CNX Nifty lost 9.95 points or 0.12% to 7,958.90.