Markets to make a subdued start on sluggish global cues

The Indian markets showing a smart bounce back in final hours, posted good gains despite rounds of volatility in last session. Today, the start is likely to remain cautious and weakness can be seen in the early deals ahead of the much-awaited two-day Fed policy review that begins later in the day. Market will also be reacting negatively to CPI inflation reading, which jumped to a 14-month high of 5.4 per cent in November, mainly on sharp pickup in food prices. The rising retail inflation will add to worries of RBI Governor Raghuram Rajan who had left interest rate unchanged earlier this month. However, there will be some solace to the market with global rating agency Fitch stating that India will continue to post good growth despite subdued prospect for the Asia Pacific region amid expected rise in US rates, dollar strength, and lower commodity prices. There will be some buzz in the oil & gas stocks on report that government will auction 28 oil and gas blocks off Mumbai and 14 in KG basin. The banking stocks too will be in action after Reserve Bank of India (RBI) governor Raghuram Rajan met with heads of top banks to discuss various issues including asset quality concerns.

The US markets recovering from their early fall rallied in later half of the trade to post decent gains in the last session, mainly due to rebound in energy stocks, as crude oil prices steadied. The Asian markets have made mostly a positive start ahead of the probably the first Federal Reserve interest-rate hike in almost a decade this week. Though, the Japanese market was suffering cuts of around a percent as the yen strengthened against the dollar.

Back home, Indian equity benchmarks ended the volatile day of trade with a gain of around half a percent on Monday with frontline gauges recapturing their crucial 25,100 (Sensex) and 7,650 (Nifty) levels. After a gap-down opening, markets showed great amount of resilience to enter into green terrain, as investors took encouragement from report that Industrial output grew by 9.8 per cent in October on the support of robust demand for manufactured products in the festival month compared to just 3.6 per cent in September. Some support also came with report that foreign Direct Investment (FDI) in services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, has surged by 20 percent to $1.46 billion (Rs 9,404 crore) during April- September 2015 as compared to $1.22 billion in the same period last fiscal. The services sector contributes over 60% to the India’s Gross Domestic Product (GDP) and receives high foreign inflows. However, gains remained capped as anxiety continues to prevail at the D-Street ahead of the US Federal Reserve meet due later this week. Also, oil prices sank to fresh seven-year lows with Brent below $39 a barrel for the first time since December 2008 after the IEA, warned that demand growth was starting to slow. Weakness in Indian rupee too dampened sentiments as greenback strengthened on prospects of a US Federal Reserve hike. On the global front, European counters traded in green in early deals, while Asian markets ended mostly in red. Back home, bout of volatility was witnessed in dying hour of trade with benchmarks managing to regain crucial levels despite entering into red terrain. Some support also came in with wholesale inflation coming at -1.99 percent in November compared to -3.81 percent in October. In November last year, the WPI-based inflation was (-) 0.17 per cent. Buying in banking counter too aided sentiments on report that the government is likely to empower the proposed Bank Board Bureau to select audit firms for public sector banks as part of its larger initiative to strengthen their corporate governance practices. Shares of steel companies remained on buyers’ radar after the government imposed import duties for five years on some stainless steel imports from China, the European Union and the United States. Finally, the BSE Sensex surged by 105.92 points or 0.42% to 25150.35, while the CNX Nifty gained 39.60 points or 0.52% to 7650.05.