Markets to remain in consolidation phase with a cautious start

The Indian markets despite paring their early jubilation of good economic data and going through a volatile trade, managed a modestly positive close in last session. Today, the start is likely to be a bit cautious and further consolidation can be expected with no major supportive cues in sight. However, traders will be getting some support with Organisation for Economic Cooperation and Development (OECD) in its Global Economic Outlook stating that India's growth rate is expected to hover near 7.5% this year as well as next even as many emerging market economies continue to lose momentum.  Meanwhile, Finance Minister Arun Jaitley has said that the roll-out of GST will convert India into one common market, prevent tax-on-tax and make goods and services cheaper. He also said that the country is on an “upward curve” and a good monsoon, GST passage and increased infra and rural spending will further accelerate the growth. The consumer goods stocks will continue to remain in action, with service tax proposals announced during the Union Budget 2016 coming into effect from June 1, imposing 0.5 percent Krishi Kalyan Cess and increasing the total incidence of service tax to 15 percent.

The US markets managed a modestly positive close in last session, coming out of their early weakness. Though, the trade remained choppy but a report from Institute for Supply Management showing an unexpected uptick in the pace of growth in manufacturing activity in May, supported the markets. The Asian markets have made a mixed start and the decliners were led by the Japanese market, which was down close to two percent in morning trade, as uncertainty over the outlook for Japanese stimulus policy revived the yen.

Back home, Indian benchmarks despite getting a wonderful start and surging to around three fourth of a percent in first half of the session, failed to maintain the lead and ended with gain of around quarter a percent only. Sentiments were sanguine from the start of trade with the report that India’s GDP grew 7.6% in the year ended March, outstripping previous leader China and faster than last year's 7.2%.  January-March growth sped up to 7.9% from the preceding quarters, suggesting that despite the caveats, India will remain an island of relative prosperity in a world afflicted by economic uncertainty. Indicating yet another better tiding for the economy, Core sector production continued on its positive trajectory for the fifth straight month, with April growth accelerating the fastest in 17 months at 8.5%.  Core sector output has been growing steadily from December, with monthly readings being 0.9%, 2.9%, 5.7% and 6.4%, respectively, through March.  Some support also came with the report that India’s manufacturing PMI in May stood at 50.7 as against 50.5 in April, indicating an uptick in the manufacturing data. However, weak trend in global markets coupled with depreciation in rupee value limited the gains. On the global front, Asian markets ended mostly in red on Wednesday, while European stocks traded lower in early trade. Back home, the local benchmark indices got off to a rollicking opening as investors rejoiced after macro-economic indicators such as GDP numbers and core sector growth showing the country’s economy has gained momentum. Besides, a strong rupee, decent fourth quarter results and advancement of monsoons too were aiding the sentiments. The indices in no time climbed to intraday highs and traded around the psychological 26,850 (Sensex) and 8,200 (Nifty) levels. But the optimism soon started showing signs of easing in late hours of trade and profit booking in few sectors and drifting European markets weighed down the local bourses by the end of session. Finally, the BSE Sensex gained 45.97 points or 0.17% to 26713.93, while the CNX Nifty rose 19.85 points or 0.24% to 8,179.95.