Markets to make a cautious start of the new week

The Indian markets rallied in last session on hopes of rate cut after the WPI inflation came at record low. Today, the start is likely to be a bit cautious and markets may consolidate after the big rally of last session. Traders will be reacting to report that India's merchandise exports contracted for the eighth month running in July, registering a 10.3 per cent drop over last year. The trade deficit widened to $12.8 billion in July from $10.8 billion in June. Though, there will be some support with Prime Minister Narendra Modi promising to continue the war on prices to bring rates further down as a measure to boost economy and provide relief to the common man. Also, Finance Secretary Rajiv Mehrishi, amid concerns over devaluation of Chinese yuan hitting Indian exports and investments, has said that the government will come out with a “carefully thought-out response” to deal with the situation. Meanwhile, industry chamber CII has hailed the government's efforts to fight the menace of black money, while advocating ‘stringent punishments’ for offenders. There will be some buzz in the telecom stocks, as the Department of Telecom (DoT) has asked mobile operators to report on weekly basis the steps taken to check frequent call drops and wants them to improve service immediately in the worst-affected areas, including in and around its headquarters. Some cheer can be seen on aviation stocks, as the fair trade watchdog CCI has said that capping of airfares will violate competition norms as it stifles the movement of market forces.

The US markets ended modestly higher in the last session on getting some positive economic data, though traders remained concerned about the timing of the Federal Reserve’s plans to raise interest rates. The Asian markets have made a mixed start, though the Chinese markets were again in red amid speculation that authorities may dial back support measures implemented to stem the equity markets.

Back home, boisterous benchmarks showcased an enthusiastic performance, by rallying around two percentage points and breaking lots of psychological levels in their northward journey on Friday after Wholesale Price Index (WPI) inflation fell for July, raising hopes of a rate cut by the Reserve Bank of India (RBI). Sentiments remained up-beat since start as key bourses made gap up opening and there appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength, as investors continued their hunt for fundamentally strong stocks. Frontline indices not only extended their rally for second straight session but also regained their crucial 8,500 (Nifty) and 28,000 (Sensex) bastions as investors took to hefty across the board buying. Sentiments got bolstered after China’s central bank today raised the value of yuan against the US dollar by 0.05%, putting a stop to the 3-day fall in the currency. Domestic sentiment was buoyed as the WPI inflation fell at a faster-than-expected annual rate of 4.05% in July, its ninth consecutive decline and lowest in atleast a decade, mainly driven by weak food and fuel prices. Some support also came with Finance minister Arun Jaitley’s statement that the Cabinet committee on political affairs chose not to prorogue Parliament, keeping the door open for both Houses to meet at short notice before the winter session begins in November, has encouraged the traders to take higher bets. On the global front, the European markets made mostly a positive start, while Asian markets ended mixed. Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. Rally in rate sensitive counters too aided the sentiments on hopes of rate cut after WPI came at record low. Finally, the BSE Sensex surged by 517.78 points or 1.18% to 28067.31, while the CNX Nifty soared by 162.70 points or 1.95% to 8518.55.