Markets to make another cautious start, may see some recovery in latter trade

The Indian markets extended their decline in last session on weak global cues and profit taking in some blue-chip stocks. Today, the start is likely to be cautious but in green, as traders will be getting some support with signs that US Fed is embracing a lower-for-longer interest rate regime. Traders will also be getting some encouragement with Jharkhand becoming the third state to ratify the Goods and Services Tax Amendment Bill in a special session of the Legislative Assembly. The government has set a deadline of April 2017 for its rollout. Also, a new UN report which calls for more transparent policies if the country aspires to become a global driver of innovation, has ranked India 66th in a list of most innovative economies, a jump of 15 places from last year. However, there will be some cautiousness too, with India Ratings and Research stating that Industrial output will not return to a sustained and high growth path as long as there is excess capacity in the manufacturing sector and private investment fails to pick up. Steel stocks will be in action, with a Moody’s report that steel demand in India will outpace the regional average while the profitability of domestic steel companies will outperform regional peers on account of an increase in domestic demand.

The US markets recovering from early decline, ended slightly higher in last session, following the release of the minutes of the Federal Reserve's latest meeting, which suggested that officials were divided about the outlook for monetary policy. The Asian markets have once again made a mixed start, with some indices trading marginally in red, while others are trading in green as minutes of the Federal Reserve’s last meeting damped prospects for a US interest-rate increase this year.

Back home, Wednesday’s session turned out to be a choppy day of trade for Indian equity markets with frontline gauges ending the session with cut of two tenth of a percent, as investors remained cautious after an influential US Federal Reserve official said interest rates could rise as soon as September. Markets made a flat start but managed to remain in green terrain in first half, as traders took some encouragement with report that Indirect tax collection rose by about 31 percent during April-June to Rs 1,99,970 crore, from Rs 1,52,740 crore collected in the year-ago period. Some support also came with the private report stating that the strong consumption and public investments have kept India's growth recovery on track this year. According to the report, the present recovery is not accompanied by current account and fiscal excesses or strong core inflationary impulses, unlike previous instances of high growth. However, markets reversed direction after hitting intraday high in afternoon session, as traders opted to book profits, as sentiment got affected with the discouraging macroeconomic data of wholesale inflation soared to a 23-month high of 3.55 per cent in July. Meanwhile, industry body Assocham 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. Weakness in global markets too dampened sentiments with European counterparts making sluggish start, Asian markets ended mostly in red on Wednesday. Closer home, markets extended their southward journey in later part of the day’s trade and the indices even went on to test important psychological 28,000 (Sensex) and 8,600 (Nifty) levels, but the key gauges got some support near those intraday low levels. Finally, the BSE Sensex declined by 59.24 points or 0.21% to 28005.37, while the CNX Nifty slipped 18.50 points or 0.21% to 8,624.05.