Markets to get a positive start, but the trade may remain cautious

The Indian markets completely lost their way in final hours and ended lower by around half a percent in last session. Today, the start of the penultimate session of the F&O series expiry is likely to be in green, though some volatility too can be expected and traders will be eyeing the US Fed’s decision. Traders will also be concerned with a panel of state finance ministers failing to reach a consensus that would enable the government to get the Constitutional Amendment Bill for Goods and Services Tax (GST) passed in the Rajya Sabha. All states were of the view that the tax rates put forward by the Chief Economic Advisor are not acceptable, however there was consensus to keep the GST rate out of the Constitutional Amendment Bill. Meanwhile, the outgoing RBI governor Raghuram Rajan has said that governments should look beyond 'uninformed and motivated' public criticism and protect the independence of their central banks to ensure stable sustainable growth. He also said that the slowdown in credit growth has been largely because of stress in public sector banks stemming from past mistakes in lending and will not be fixed just by a cut in policy rates. There will be some buzz in the Aviation stocks on report that air traffic in India grew by a strong 22 per cent between January and June. Air traffic grew at double-digit pace in June, with airlines reporting robust occupancy figures.

There will be lots of important earnings announcements too, to keep the markets buzzing.Bharti Airtel, HDFC, Bajaj Auto, Yes Bank, Dabur India, GIC Housing Finance, JSW Steel, Torrent Pharma and Castrol India are among many to announce their numbers today.

The US markets remained mostly flat in the last session with traders reluctant to make any bet ahead of Wednesday’s Federal Reserve decision, even though the Fed is widely expected to leave interest rates unchanged. The Asian markets have made mostly a positive start, with the Japanese market rebounding after three straight session of fall, as the yen retreated amid speculation over the outlook for Japanese stimulus.

Back home, stock markets in India capitulated by around half a percent on Tuesday after showing signs of consolidation in early trade, as discouraging Q1 numbers spooked investors’ sentiments in the dying hours of trade. Dr Reddy's Laboratories, one of India's largest and most respected global pharmaceutical companies, missed the street’s expectations on all counts with consolidated profit falling sharply by 76.3% year-on-year (Y-o-Y) to Rs 153.5 crore in Q1FY16, hit largely by US business and weak operational performance. Further, TVS Motor also slid after the company reported profit growth, which lagged street estimates. The company reported 21.15% rise in its net profit at Rs 121.25 crore for the quarter ended June 30, 2016, as compared to Rs 100.08 crore for the same quarter in the previous year. Sentiments remained subdued with the report that sectors like construction, iron & steel, chemicals continued to face financial stress with dip in margins and profitability leading to higher number of credit rating downgrades in the June quarter. Further upside risks to price rise still prevails, largely owing to increasing international commodity prices and implementation of the seventh pay commission awards, while CPI inflation is likely to be in the range of 5.7-5.9% in July. According to a private report, structural issues in the inflation dynamics continue to prevail as rural CPI inflation on average remains above the urban CPI inflation. Meanwhile, investors remained uncertain about the much-delayed goods and services tax (GST) bill would be cleared as state finance ministers meet to discuss it ahead of a debate in the Rajya Sabha, the upper house of Parliament.  The GST Bill, which intends to convert 29 states into a single market through a new indirect tax regime, was earlier planned to be introduced from April 1 this year, but the deadline was missed as the legislation to roll it out remains in limbo in the Opposition-dominated Rajya Sabha. On the global front, Asian markets ended mostly in green on Tuesday, while European stocks were little changed in early deals. Back home, after starting the session on cautious note, Indian benchmark indices traded near neutral line, altering between positive and negative territory, for most part of the session, but saw a heavy flow of selling in final hour of trade on account of disappointing quarterly numbers by some blue-chip firms. Finally, the BSE Sensex ended lower by 118.82 points or 0.42% to 27976.52, while the CNX Nifty dropped 45 points or 0.52% to 8,590.65.