Markets to make a soft-to-cautious start on weak global cues

The Indian markets rallied in the last session on expectations the US Federal Reserve may delay hiking interest rates until after the presidential election in November. Some positive comments from the top government officials about the economy too supported the markets, with benchmark indices reclaiming their key psychological levels. Today, the start is likely to be cautious and some profit taking can be seen in very early trade after last sessions’ huge gains on weak global cues with Fed Vice-Chairman Stanley Fischer stating that the US job market was close to full strength, while adding that the pace of interest rate hikes will depend on how the economy is doing. On the domestic front, trade unions have said that they will go ahead with nation-wide strike on September 2, rejecting as “completely inadequate” the government’s 42 percent hike in minimum wage to Rs 350 per day. Earlier, Finance Minister Arun Jaitley announced a slew of labour-friendly measures including hiking of minimum wage to Rs 350 a day for unskilled non-agricultural workers for 'C' category areas in central sphere. However, markets may get some support with a Ficci survey that India's economy is likely to expand 7.8 percent during the current financial year on the back of good monsoons. The estimated median GVA (gross value added) growth for Q1 FY17 has been put at 7.6 percent. There will be some buzz in the auto sector stocks, as the Minister for Road Transport and Highways Nitin Gadkari has said  that the draft vehicle scrapping policy would offer a combined benefit of Rs 14,000 crore to the Centre and states and drive the auto industry growth by 22 percent.

The US markets ended modestly in red in the last session on uncertainty about the outlook for interest rates. However the selling pressure was relatively subdued ahead of the release of the closely watched monthly jobs report on Friday. The Asian markets have made a mixed start, with some indices losing quarter to half a percent in early deals, while the Japanese market has advanced again as the yen held near its weakest level since July.

Back home, Indian benchmark equity indices staged a stunning performance on Tuesday by vehemently rallying over one and half percent in the session and re-conquering their key psychological levels. Monday’s optimism got spilled over into day’s trade, helping the frontline indices in extending the winning momentum for second successive session, as encouraging global developments buttressed domestic sentiments. Investors continued to build hefty positions across the board as sentiments got a boost after consumer spending rose for a fourth straight month in US, pointing to a pick-up in the world’s largest economy. On the domestic front, sentiments got some support with Reserve Bank of India’s Annual Report indicating that the near-term growth outlook for India seems brighter than last fiscal and the economy is likely to expand at 7.6 percent in 2016-17. It said that a better than anticipated agricultural performance and the possibility of allowances under the 7th Pay Commission's award being paid out in the fourth quarter of 2016-17 provide upsides to this projection. Also, Niti Aayog Vice-Chairman Arvind Panagariya stated that India’s economy will accelerate to 8% growth in the current financial year thanks to a good monsoon, policy reforms and PM Narendra Modi’s focus on implementation at the grassroots level. Some support also came with the report that foreign portfolio investors (FPIs) bought shares worth a net Rs 286.52 crore on August 29, 2016. On the global front, Asian markets ended mostly lower on Tuesday, while European markets edged higher in early deals. Back home, the local benchmarks got off to a positive start as investors were largely influenced by the supportive leads from Asian markets. The frontline indices soon gathered momentum and traded with over half a percent gains through the morning session of trade. Second half of the session saw the key gauges capitalize on the momentum further and spurt to session’s highest levels in dying moments. Finally, the BSE Sensex surged 440.35 points or 1.58% to 28343.01, while the CNX Nifty gained 136.90 points or 1.59% to 8,744.35.