Markets to make a cautious start tracking mixed global cues

The Indian markets bucking the global trend showed some recovery in the last session and posted modest gains despite a choppy trade, on hopes of a rate cut after decline in CPI inflation and weak IIP data. Today, the start is likely to remain cautious as indicated by global cues. There will be some concern with reports that in September rainfall fell 15 per cent below average, which could mean the season will end up in deficit. Meanwhile, Prime Minister Narendra Modi has reviewed preparations for roll out of the new Goods and Services Tax (GST) regime, possibly from April 1 next year, with Finance Minister Arun Jaitley and his team making a presentation on the milestones achieved and the road ahead. The presentation detailed the steps to follow including the timetable to get the supporting legislations approved. There will be some action in infra sector stocks, on report that government may soon come up with an ambitious Rs 3-lakh-crore Economic Corridor project to develop 35,000 km of highways for faster movement of freight. Telecom stocks too could be in focus after Anil Ambani-led Reliance Communication agreed to merge its wireless telecom business with Aircel to create India's third biggest telecom operator in terms of subscriber base.

The US markets made a mixed closing in last session, the trade remained lackluster and the major averages moved to the upside early in the session but showed a lack of direction as the day progressed. The Asian markets have made a similar start and some of the indices in the region are down by over half a percent led by the Japanese market, as the yen gained and gold edged higher following gains in US Treasuries.

Back home, after trading on a feeble note for most part of the session, Indian benchmark indices managed to negotiate a close in the green terrain, breaking the two session downtrend, as investors showed renewed buying interests in Consumer Durables, Banking and PSU counters. Investors’ sentiments got some comfort after the country’s retail inflation slowed to 5.05 percent in August led by easing food prices especially vegetables and making a strong case for the newly appointed RBI governor Urjit Patel to cut rates in the next monetary policy review on October 4, 2016. Lower inflation in vegetables in August helped as the rate of price rise stood at a mere 1.02 percent against 14.06 percent in July.  However, other two microeconomic data came as bummer for domestic markets as India's industrial output fell by 2.4 percent in July after a spurt in May and June, while Wholesale price inflation soared to a two-year high in August to 3.74 percent driven mainly by a gradual increase in prices in the manufacturing sector. A slowdown in industrial activity does not bode well for Asia's third largest economy, especially after overall growth faltered to a 15-month low between April and June.  Furthermore, there were report that India is likely to post its first current account surplus in nine years in the latest quarter, which should bolster the rupee though it is not a good sign for the economy as it reflects weak investment demand at home and subdued exports. Sentiments got some support with a survey report stating that implementation of Goods & Service Tax (GST) will lead to increased tax compliance and attract more foreign direct investments across sectors due to tax transparency and ease of doing business. Adding the optimism among market participants the private report indicated that the US expressed willingness to have a bilateral investment treaty with India that will boost investor confidence and help increase size of bilateral trade. Finally, the BSE Sensex ended up by 18.69 points or 0.07% to 28372.23, while the CNX Nifty gained 11 points or 0.13% to 8,726.60.