Markets to make a cautious start on mixed economic data

The Indian markets managed a marginally positive close in last session, though they came off substantially from their day’s high on profit taking after the Reserve Bank of India, as expected maintained status quo in its monetary policy review. Although, the apex bank said the country's GDP growth, which it estimates to be 5.5 percent in the current fiscal, will improve to 6.3 percent in 2015-16. Today, the start of the new month is likely to be cautious. Traders will be reacting to the mixed set of economic data, on the one hand while the eight core industries, grew at 5.8 per cent in August this year, compared to 4.7 per cent during the corresponding month of last year, then on other the data released by the Controller General of Accounts has revealed that Fiscal deficit touched 74.9 percent of the Budget Estimates for 2014-15 to cross Rs 3.97 lakh crore at the end of August. It also showed that the total expenditure of the government during April-August was over Rs 6.72 lakh crore or 37.5 percent of the estimates for the entire 2014-15 fiscal. There will be some buzz in the oil marketing companies with announcement of Petrol price cut by 54 paisa a litre, also  the price of non-subsidised cooking gas (LPG)  has been cut by Rs 21 per cylinder and that of jet fuel (ATF) by a steep 3 percent on the back of falling international oil rates. However, the widely expected first reduction in diesel rates in over five years will have to wait till the return of Prime Minister Narendra Modi from the US. There will be buzz in the auto stocks as well, as they will start announcing their monthly sales numbers.   

The US markets continued their somber run and once again ended in red in last session, as tepid data raised concerns about the pace of the economic recovery. Home prices were weaker than expected in July, while consumer confidence fell from 7-year highs in September. The Asian markets have retreated with some of the indices heading to the fourth straight session of fall.

Back home, Indian equity benchmarks ended the volatile day of trade slightly in the green on Tuesday as investors shrugged off Reserve Bank of India’s (RBI) neutral stance on key policy rates. Though, markets rose in a knee jerk reaction to the release of monetary policy, but all the gains were erased after central bank, in its monetary policy review said upside risks to its January 2016 inflation target of 6% are significant and its future policy stance will be influenced by this inflation target. Nevertheless, market managed to keep their head above water supported by bargain buying in dying hours of trade.  Markets got some support after Finance Secretary Arvind Mayaram suggested that the economic conditions were becoming favourable for cut in interest rates. Investors also got some confidence after Prime Minister Narendra Modi pitched 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’. Meanwhile, RBI after its fourth bi-monthly monetary policy review kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8% and the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). It has reduced the liquidity provided under the export credit refinance (ECR) facility from 32% of eligible export credit outstanding to 15% with effect from 10 October 2014. On the global front, European markets traded mixed in early deals, while Asian markets ended mostly in the red. Back home, tyre makers viz. Ceat, MRF, J K Tyre, TVS Srichakra, Apollo Tyres, Goodyear India, Falcon Tyres and Dunlop India all edged higher on hopes of higher margins due to falling rubber prices. On the flip side, auto shares remained under pressure ahead of the release of September sales numbers. Finally, the BSE Sensex gained 33.40 points or 0.13%, to 26630.51, while the CNX Nifty added 5.90 points or 0.07% to 7,964.80.