Markets to make a soft-to-cautious start; RBI policy eyed

The Indian markets despite going through some choppiness managed to extend the gains for the fourth straight session. Today, the start is likely to be negative-to-cautious on weak global cues. Traders will be eyeing the Reserve Bank of India’s (RBI) monetary policy review, though the general expectation is that RBI is likely to keep interest rates unchanged and governor Rajan is not likely to oblige the markets too soon. However, traders will be eyeing his statement for clues as to whether there is a chance of another interest rate cut this year. The banking stocks may show some consolidation after two straight sessions of gains, though industry body FICCI has said that government's plan to recapitalise public sector banks with infusion of Rs 70,000 crore over the next four years, augurs well for the banking sector and will help fuel economic growth. Shipping stocks too may remain in somber mood, as India Ratings and Research (Ind-Ra) has maintained a 'negative-to-stable' outlook for the shipping sector for the current financial year. On the other hand there will be some buzz in the infra sector on report that the government plans to develop 15,000 km of National Highways (NH) at an estimated cost of Rs 1,90,000 crore, to improve connectivity with far- flung areas including major tourism centres.

The US markets turned lower in last session on getting some disappointing economic data. Institute for Supply Management showed that activity in the US manufacturing sector unexpectedly grew at a slower rate in July. The Asian markets have made mostly a lower start and the Chinese market too was modestly in red, despite the regulators restricting short selling of stocks, freezing out day traders, in their latest step aimed at stabilizing the equity market.

Back home, Indian equity benchmarks, extending their winning streak for fourth straight session, managed to eke out slender gains. Earlier, markets after a sluggish start gained momentum and recaptured their crucial 28,200 (Sensex) and 8,550 (Nifty) bastions as sentiments remained up-beat on reports that the seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI)-a composite single-figure indicator of manufacturing performance came at a six-month high of 52.7 in July, from 51.3 in June. Sentiments also remained jubilant after Moody’s said that the Reserve Bank of India (RBI) is likely to cut the benchmark rate by 0.25% in its monetary policy review tomorrow as inflation is likely to remain subdued on the back of average rainfall and lower commodity prices. Meanwhile, infrastructure output grew at a slower pace of 3 percent in June as sectors like coal and steel turned weak while oil and gas production fell -- bolstering the case for faster reforms and further rate cuts by the RBI. Some support also came with Minister of State for Finance Jayant Sinha’s statement that India is aiming to be among the top 30 countries in the world in terms of ease of doing business from the present 142nd position among 189 nations. However, gains remained capped as investors opted to book some of their profits at higher levels. Traders were concerned about the logjam in the parliament with protests by Opposition members led by the Congress continuing in the Lok Sabha, forcing the adjournment of the House. Rajya Sabha too was adjourned for the day. With nearly half of the Parliament Monsoon Session nearly washed out there is hardly any chance that any important bill will be passed. On the global front, European counters traded in green in early session, while Asian markets ended mostly in red. Back home, appreciation in Indian rupee too supported the sentiments. Buying in state-owned banks too aided the sentiments after the government proposed capital infusion to the tune of nearly Rs 20,000 crore in the next two months to boost their capital base. Finally, the BSE Sensex gained 72.50 points or 0.26% to 28187.06, while the CNX Nifty added 10.20 points or 0.12% to 8543.05.