Markets to get a cautious start on sluggish global cues

The Indian markets turned a bit somber and lost around a quarter percent in the last session, after both the inflation gauges CPI and WPI showed uptrend due to rise in food inflation. Today, the start is likely to remain cautious on sluggish global cues, amid increased speculation that the US will raise interest rates. Meanwhile, industry body Assocham has said that the rise in Wholesale Price Index (WPI)-based inflation is in line with the industry’s expectation, but added that the government must take “strong action” to address the structural issues of demand and supply within the industry. Traders will be getting some support with the report that Indirect tax collection rose by about 30.8 percent during April-June to Rs 1,99,970 crore, from Rs 1,52,740 crore collected in the year-ago period. Banking stocks will be in action, as the outgoing RBI governor Raghuram  Rajan has called for a level playing field between public and private sector banks, besides expressing concern over the rush into retail credit at the expense of project finance at a time when India needs massive infrastructure funding. He reiterated the need to allow public sector banks to decide their own business strategies.

The US markets lost momentum and slipped below the record highs in the last session, after Federal Reserve officials made hawkish comments despite anemic inflation data. However, the housing starts last month rose 2.1 percent from June to an annual rate of 1.211 million. The Asian markets have made a mixed start, though some indices are trading in green supported by energy stocks as crude oil traded above $46 a barrel.

Back home, the Indian equity markets witnessed a lack-luster and volatile day of trade on Tuesday after showing firm trend in the previous session.  Sentiments came under pressure after India's wholesale price index inflation rose at a faster-than-expected pace in July, gaining 3.35 percent from 1.62 percent in June 2016. Rising for the first time in April after 17 straight months of contraction, WPI inflation has consistently been pushed up by food inflation, which has steadily risen since February. It shot up by 11.82 percent in July after rising by 8.18 percent in June and 7.88 percent in May. Furthermore, Retail inflation, which came last week, also shot up to nearly two-year high of 6.07 per cent in July, well above the Reserve Bank of India’s (RBI’s) comfortable level, on surge in prices of food items as the demand for sugar, oil & fats and spices rose ahead of the festival season. However, Index of Industrial production (IIP) growth surged to 2.1 percent in June as compared to 1.1 percent in May, but remained much below the 4.2 percent growth reported in June 2015, indicating a poor performance of manufacturing sector. Though, gains in commodity counters like Metal and Oil & Gas restricted the market to extend losses. Some support also came with the report that the Bihar State Legislature ratified the Constitution Amendment Bill on Goods and Services Tax (GST) in a special one-day session. On the global front, Asian market ended mostly in red on Tuesday as the price of oil took a breather from a three-day rally, while European stocks lost ground in early trade. Back home, after getting a cautious start, the local benchmarks traded in a tight range near their neutral line throughout the morning trade, but witnessed sharp selling in noon trade after the country’s wholesale inflation soared to a 23-month high in July 2016. Besides, weak start of European markets coupled with depreciation in rupee value against the US dollar also weighed on the sentiment. Finally, the BSE Sensex slumped by 87.79 points or 0.31% to 28064.61, while the CNX Nifty dropped 29.60 points or 0.34% to 8,642.55.