Markets to see some consolidation reacting to weak economic data

The Indian markets bucking the global trends, extended the gains in last session with benchmarks surging to fresh 52 weeks high. Today, the start is likely to be a bit cautious and soft amid the mixed global cues and reacting to some weak economic data. India's economic growth rate slipped to 6-quarter low of 7.1 percent in April-June, as compared to 7.9 percent in the previous quarter, mainly due to subdued performance of mining, construction and farm sectors. The economy had expanded at 7.5 percent in the April-June quarter of last financial year, 2015-16. Also, the Core Sector growth slowed to 3.2 percent in July, compared to 5.2 percent recorded in June. However, the cumulative growth of the sector during April-July period of the fiscal was 4.9 percent. Meanwhile, fiscal deficit in the first four months of the current financial year stood at Rs 3.93 lakh crore, or 73.3 percent of the Budget estimates for 2016-17. There will be some buzz in the infra sector, as the government has announced a package of measures to revive the construction sector, putting in place a mechanism to release funds stuck in arbitration awards to revive stalled projects. The PSU oil marketing companies too will be buzzing with the announcement of hike in petrol prices by Rs 3.38 a litre and diesel by Rs 2.67 per litre, the first increase in rates since July.

The US markets despite recovering from the lows of the day ended modestly lower in the last session, adding to losses posted in the last session, ahead of the release of the Labor Department's closely watched monthly jobs report on Friday. The Asian markets have made a mixed start, with some of the indices trading in red weighed down by decline in crude oil prices, though the Chinese market was up after data indicated a pickup in Chinese manufacturing, while the Japanese market was up on continued weakness in yen.

Back home, Indian shares extended their winning streak for third straight session on Wednesday, led by gains in Capital Goods, banks and consumer durables companies, but major benchmarks ended off their day’s high as investors booked profits in metal and select information technology (IT) names. Sustained foreign fund inflows and persistent buying by domestic financial institutions as well as retail investors, supported the markets’ uptrend. Including Tuesday's inflows, FPIs have pumped in about Rs 40,100 crore in Indian equities so far this year, while DIIs have put in roughly Rs 10,600 crore. Sentiments remained buoyant 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 monsoon. The estimated median GVA (gross value added) growth for Q1 FY17 has been put at 7.6 percent. Also, raising confidence among investors Niti Aayog Vice-Chairman Arvind Panagariya said India's economy will accelerate to 8 per cent 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. However, there was some cautiousness due to Credit Suisse’s report that India along with Philippines, Indonesia and Malaysia are likely to continue to underperform in an Asia and emerging market context as these four countries are overvalued in terms of price to book vs return on equity valuations.  For India, every time the premium of price to book vs return on equity rises to above 50%, it has tended to underperform and MSCI India has underperformed so far this year by 5.8%. Meanwhile, good buying was observed in select auto stocks as the Minister for Road Transport and Highways Nitin Gadkari 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. On the global front, Asian markets ended mixed on Wednesday, while the European counterparts were trading in the positive territory in early deals. Back home, the benchmarks slowly started gaining pace and by afternoon session surged to the high points of the day. Finally, the BSE Sensex surged 109.16 points or 0.39% to 28452.17, while the CNX Nifty gained 41.85 points or 0.48% to 8,786.20.