Markets to make a cautious start; CPI, IIP data eyed

The Indian markets surged over half a percent in last session after Infosys third quarter earnings beat street expectation with net profit rising 5 percent sequentially to Rs 3250 crore, and revenues increasing 3.4 percent to Rs 13796 crore. Today, the markets are likely to make a cautious start following muted trend seen in other Asian markets. Moreover, traders will be eyeing the major macro data of inflation and industrial production to be announced later in the day that will likely to set the tone for the Reserve Bank of India’s (RBI’s) move on interest rates in its next policy review in February. IIP data is likely to expand to 2.2 per cent in November, while the CPI inflation should accelerate to 5.4 per cent in the month of December as compared to 4.4 per cent reported in the month of November. Traders will get support from report that the government plans to allow resolution of disputes in infrastructure development through arbitration in neutral places like Singapore, London and Malaysia, a step aimed at increasing the confidence of foreign investors in putting money in a sector that is key to economic growth but is struggling due to funds shortage. Gems and Jewellery stocks will be buzzing with the jewellery industry urging the government to reduce customs duty on gold to 2 per cent, from 10 per cent at present, in order to check smuggling of the precious metal.

On the global front, US stocks declined on Friday following a two-day rally as December’s jobs report gave a mixed view of the economy, with financial shares leading the way lower. The Asian markets were trading mixed following a soft finish on Wall Street though sentiment was supported by speculation the Federal Reserve would be patient in tightening policy given the weakness of wages apparent in the jobs numbers.

Friday’s session turned out to be a fabulous day of trade for the Indian equity markets, where frontline gauges garnered gains of over half a percent. Hectic buying activity which took place during last leg of trade mainly drove the markets higher, with frontline gauges ending near intraday high levels, recapturing their crucial 27,450 (Sensex) and 8,250 (Nifty) bastions. Earlier, markets made gap-up opening as sentiments remained up-beat with Finance Minister Arun Jaitley’s statement that significant downward trend in inflation has been recorded in the second and third quarter of 2014-15. The external environment has also largely turned in India’s favour. But, markets entered into red terrain as investors turned nervous ahead of Infosys Q3 numbers. Meanwhile, selling by foreign institutional investors continued and they were net sellers in Indian equities worth Rs 477 crore on January 8, 2014, as per provisional stock exchange data. In last hour of trade, domestic sentiment was propped up as Infosys, the country’s largest software services exporter, reported a 13 per cent rise in its quarterly net profit, beating estimates, as it won more outsourcing contracts from Western clients. Some support also came after the company retained its revenue guidance for the fiscal year ending March 2015. The company has maintained its guidance of 7%-9% growth in revenue in dollar terms for the year ending March 2015 (FY 2015) based on exchange rates as on September 30, 2014. On the global front, European shares snapped a two-day winning streak on Friday, ahead of key US non-farm payrolls data, with Spain’s Banco Santander sliding over 10 per cent after unveiling a capital hike and dividend cut. Back home, appreciation in Indian rupee supported the sentiments. The partially convertible rupee was trading at 62.37 per dollar at the time of equity market closing against the Tuesday’s close of 62.67 on the Interbank Foreign Exchange. Meanwhile, shares of pharmaceutical companies remained on buyers’ radar on reports that the Indian and global companies are looking to invest over Rs 1,000 crore in Gujarat’s pharma sector. Finally, the BSE Sensex surged by 183.67 points or 0.67%, to 27458.38, while the CNX Nifty gained 49.90 points or 0.61% to 8,284.50.