Markets to make a cautious start ahead of RBI’s policy review

The Indian markets after a choppy trade managed a flat closing in last session. Today, the start is likely to be cautious ahead of Reserve Bank of India's (RBI) policy review due later in the day. There is wide expectation that RBI governor Raghuram Rajan will go for a 25 basis point rate cut and if it happens, the markets will get a big boost and the Nifty may move towards 8500 level, on the same time a hawkish statement by the governor may make the mood somber and the Nifty can retest 8400 level. Though there a point of rate cut, as declining for the second month in a row, the output of eight core industries contracted by 0.4 percent in April on poor performance of electricity, cement, refinery products and fertiliser sectors. There will be some buzz in the metals and mining sector, as the Steel and Mines Minister has said that the centre is working with states to start by year end the auction process for about 200 mines containing minerals such as iron ore, bauxite and limestone. The PSU oil marketing companies and the aviation stocks will continue to remain in action, as the Jet fuels have been hiked by a steep 7.5 percent in line with firming global rates.

The US markets made a modestly higher closing in last session, though the trade remained lackluster throughout the day on mixed economic data. There was slightly bigger than expected increase in personal income in April, while the personal spending came in unchanged in April following an upwardly revised 0.5 percent increase in March. The Asian markets have made a mixed start. Japanese market too was trading higher, as the yen held near a 12-year low against the dollar after data showed growth in US manufacturing.

Back home, Indian equity benchmarks ended the Monday’s trade on quiet note as investors remained on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review due tomorrow. Though, after a cautious start, domestic markets gained ground and traded mostly in the green as sentiments remained up-beat on reports that India has overtaken China to become the world’s fastest growing economy by clocking 7.5 percent GDP for the March quarter. Finance Minister Arun Jaitley has said that India has the potential to improve the economic growth to double-digit. Meanwhile, HSBC report stating that India’s manufacturing PMI increased to a four-month high of 52.6 in May from 51.3 in April too aided the sentiments. Some support also came with report that, beating its own financial target, the government has contained the fiscal deficit at 3.99 per cent of GDP in 2014-15 to Rs 5.01 lakh crore. However, markets could not hold up to the early gains and ended flat as investors opted to book most of their profit at higher levels. Traders remained concerned with industry body Assocham's report that around 1,550 projects with investments worth about Rs 26.5 lakh crore remained stuck at different stages as of December-end across 21 states on issues such as land acquisition and lack of funds. On the global front, European counters made a weak start, while Asian markets ended on pessimistic note. Back home, appreciation in Indian rupee supported the sentiments. Some support also came with reports that foreign portfolio investors bought shares worth a net Rs 2284.30 crore during the previous trading session on May 29, 2015. Meanwhile, stocks related to capital goods majors edged higher led by gains in L&T and BHEL on the achieving fresh orders. Finally, the BSE Sensex gained 20.55 points or 0.07% to 27848.99, while the CNX Nifty lost 0.25 points to 8,433.40.