Markets to remain in consolidation mood with a cautious start

The Indian markets giving up their early gains entered the consolidation phase in last session, though the benchmarks ended flat but fatigue after two straight sessions of gains was clearly visible, while traders also reacted to the mixed set of economic data. Today, the start is likely to be cautious and the consolidation will extend. Today all eyes will be on TCS and the whole IT pack, as the largest IT outsourcing firm by sales, will announce its June quarter numbers and is expected to report modest drop in net profit. Markets will be getting some support with the cabinet approving a Rs 12,000-crore outlay for Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to impart skills to 1 crore people over the next four years (2016-20). Skill training would be done based on industry-led standards aligned to the National Skill Qualification Framework. There will be some buzz in the gold and jewellary stocks, as the government has relaxed the rules for its tax on gold jewellery sales that was introduced earlier this year in an attempt to address concerns raised by the industry. As per the new rules, jewellers with turnover up to Rs 150 million ($2.2 million) a year will be exempt from the excise duty. The aviation stocks too may see some action, with the Directorate General of Civil Aviation (DGCA) coming up with the revised norms that cap ticket cancellation charges and bar airlines from levying an additional amount for refund.

The US markets made a mixed closing in the last session, though the Dow and the S&P 500 still reached new record closing highs. The traders remained reluctant to make significant moves ahead of the release of a slew of US economic data and important results over the coming days. The Asian markets too have made a mixed start and some of the indices are trading lower in early deals, however Japanese shares headed for their longest rally since April as investors awaited details of Prime Minister Shinzo Abe’s stimulus plans.

Back home, Indian benchmarks staged a lackadaisical performance on Wednesday’s trading session after remaining in a narrow band to finally settle flat. The frontline gauges took a breather, after showcasing a scintillating performance in last two sessions, as investors turned jittery after the mixed macro data was announced yesterday. Through, Industrial production growth recovered into the positive zone in May after shrinking in the previous month, the muted growth showed just a tepid recovery. The Index of Industrial Production (IIP) rose 1.2 per cent in May from a year earlier. Furthermore, Retail inflation scaled a 22-month high in June because of a sharp increase in vegetable prices, dampening hopes of a rate cut in August even as the small increase indicated that inflation may start cooling soon. Consumer Price Index (CPI) rose 5.77 percent in June 2016 compared with 5.76 percent rise in May 2016. However, investors got some comfort with report that monsoon rains have covered the entire country, two days ahead of schedule despite the week-long delay in its onset. Also, sowing of kharif crops has gathered pace across the country, raising hopes of higher growth in businesses dependent on the farm sector and lower dependence on imports for commodities such as cotton, maize and soyabean. On the global front, Asian markets ended mostly in green on Wednesday as accommodative economic policy in major countries whet investors risk appetite damaged by uncertainty from Brexit, while European stocks gained ground on Wednesday. Back home, the local indices started the session on positive note as investors were largely influenced by the supportive leads from Asian markets. The frontline indices soon gathered momentum and touched intraday highs in early hours but the optimism fizzled out sooner and the indices see-sawed around the neutral line though rest of the session. Finally, the BSE Sensex ended higher by 7.04 points or 0.03% to 27815.18, while the CNX Nifty dropped 1.55 points or 0.02% to 8,519.50.