Markets to get a flat but positive start reacting to CPI numbers

The Indian markets despite some volatility surged in last session on upbeat macro data. Today, the start is likely to be flat, albeit with a positive bias and traders will be first reacting to the Consumer price inflation (CPI)data that eased to 3.66 percent in August from 3.69 percent in July 2015, adding pressure on RBI Governor to cut interest rates for a fourth time this year. Meanwhile, Finance Minister Arun Jaitley, attributing rise in prices of certain food items to seasonal factors has said that inflation overall is moderating and the price situation is under control. As per the CPI data, food inflation inched up to 2.2 percent in August from 2.15 in the previous month. Markets are also likely to get some support with Economic Affairs Secretary Shaktikanta Das' statement that the government and RBI are prepared for all eventualities, as and when the situation emerges. There will be some buzz in the aviation sector, as the Civil Aviation Minister Ashok Gajapathi Raju Pusapati has said that the proposed new civil aviation policy was under advanced stage of preparation and the draft would be placed in the public domain for eliciting opinions. The metals stocks are likely to extend their gains, as the government has finally imposed provisional safeguard duty of 20 percent on import of certain categories of steel with a view to protect domestic producers from recent surge in inward shipments.

The US markets ended modestly lower in last session, amid uncertainty ahead of the Federal Reserve's two-day monetary policy meeting later this week. Traders also preferred to remain on sidelines with no major US economic reports due for the day. The Asian markets have made a mixed start with Chinese market once again showing sharp cuts, while the Japanese market moving higher supported by weakening yen ahead of BOJ’s policy announcement.

Back home, boisterous benchmarks showcased an enthusiastic performance on Monday, by rallying around a percentage point amid some good macro-economic data. Despite some initial hiccups, markets gained ground and the benchmarks managed to fervently gain from strength to strength as investors continued hunt for fundamentally strong but oversold stocks. Frontline indices not only ended the session near intraday high levels but also recaptured their crucial 7,850 (Nifty) and 25,800 (Sensex) bastions as investors took to hefty across the board buying. Sentiments remained buoyed as industrial production expanded at better-than-estimated 4.2 per cent in July this year compared to the same month last year as manufacturing activity and offtake of capital goods improved. Sentiments further got a boost after Wholesale Price Index (WPI) inflation declined to (-) 4.95 per cent in August from (-) 4.05 per cent in July. It was primarily on account of a sharp cooling in fuel costs. The wholesale fuel prices tumbled 16.50 per cent from a year ago, while food prices dropped 1.13 per cent year-on-year. Some support also came with Minister of State for Finance Jayant Sinha stating that RBI should take into account various factors, including low inflation, while deciding on monetary policy stance. Buying got intensified after European made a positive start, while Asian markets exhibited mixed trend. Back home, appreciation in Indian rupee too supported the sentiments. Buying in metal counter too aided sentiments on reports that the government will soon notify a 20 per cent import tax on some hot-rolled steel products. The Directorate General of Safeguards last week recommended the duty for 200 days as it further investigates the issue. Stocks related to infra space too edged higher, as Finance Minister Arun Jaitley promising the fairest tax regime and a stable policy environment, invited US businesses to take advantage of the huge investment opportunity in the infrastructure sector. Finally, the BSE Sensex surged by 246.49 points or 0.96 % to 25856.70, while the CNX Nifty soared by 82.95 points or 1.06 % to 7872.25.