Markets to make a flat-to-cautious start on weak IIP data

The Indian markets made a positive close in last session despite a choppy trade. Today there will be some cautiousness in the start with unexpected drop in industrial production numbers sequentially, sentiments are likely to be weighed down by the growth worries despite good going in the other global markets after European leaders gave Greece three days to enact reforms or face ejection from the currency union. IIP for the month of May came in at 2.7 percent lower than street expectation and even lower than the downwardly revised 3.36 percent of April. However, there will be some upmove in the latter part of trade and traders will be getting some support with Finance Minister Arun Jaitley’s statement that tax revenues are expected to be higher this year while improving macroeconomic fundamentals and ongoing reforms make 8-10 per cent growth “eminently achievable”. There will be some jubilation with Indirect tax revenues growing 37.5 per cent to nearly Rs 1.54 lakh crore in the first quarter of the current fiscal, powered by a robust show in excise collections. Also, there will be some encouragement, with report that since the launch of ‘Make in India’ initiative, FDI has increased by 47-48 per cent over the previous year. There will be some buzz in metals and mining stocks, with the Goa State Pollution Control Board (GSPCB) granting consent-to-operate to 57 iron ore mining leases, with stringent conditions.

The US markets rallied in last session on optimism of Greece finally reaching a new agreement with its creditors. The Asian markets have mostly made a green start taking cues from the Chinese market which surged, as country’s exports rose for the first time in four months in June, providing fresh evidence that growth is stabilizing.

Back home, Indian equity benchmarks ended the choppy day of trade in green terrain with a gain of over one third of a percent on Friday. Markets after a positive start alternately swung between positive and negative zone in noon deals, but hectic buying activity which took place during last leg of trade mainly drove the markets higher on the back of improved prospects for a deal to keep Greece in the currency area at a weekend summit of European leaders. Investors also reacted positively on reports that negotiations on India-Mauritius double taxation avoidance agreement DTAA are in very advanced stage. Some support also came after International Monetary Fund (IMF), which in its World Economic Outlook Update said that India will be the world’s fastest growing economy for the second consecutive year in 2016 at 7.5 per cent. However, gains remained capped on concern about the monsoon progress as the India Meteorological Department (IMD) reported that after a month of adequate showers in June, monsoon rainfall in India was 51% less than normal last week. It warned that rainfall activity is expected to be subdued over many parts of western India, central India and interior peninsula. Investors also remained on sidelines ahead of the Industrial Production data to be released later in the day. On the global front, European counters traded mostly in positive in early deals, while Asian markets ended mostly in green. Back home, selling in fast moving consumer goods companies (FMCG) counter too dampened the sentiments, on concerns that an uptick in inflation amid fears of poor monsoon and unfavorable business environment in the rural markets hurt the sentiments. Shares of telecom companies were trading lower after the govt. ordered special audit of mobile networks to check call drops, according to media reports. On the flip side, shares related to Capital Goods space edged higher on expectations of higher industrial growth in May lifted the sentiments. Metal related stocks too showed some recovery on strength in Chinese market. Finally, the BSE Sensex gained 87.74 points or 0.32% to 27661.40, while the CNX Nifty added 32.00 points or 0.38% to 8360.55.