Markets to get a flat to cautious start ahead of monetary policy review

The Indian markets went for a rally in last session ahead of the monetary policy review, on hopes of a rate cut. Today, the start of the crucial day is likely to be in green though all eyes will be on the bi-monthly monetary policy meet where six-member Monetary Policy Committee (MPC) will announce its decision on interest rates later in the day. Apart from hopes of a rate cut, the language of the policy too will also be watched closely for cues on the future course of RBI’s action on various areas. Traders will be getting some support with global ratings agency Crisil predicting a strong boost to India's domestic consumption in 2016-17 led by implementation of 7th pay panel`s recommendations, with reforms like the Goods and Services Tax (GST) to benefit the uptick. Also, the Union Minister for Commerce and Industry Nirmala Sitharaman has said that the 'One Nation One Tax' regime through the Goods and Services Tax (GST) system would come into effect on April 1, 2017, leading to a unified domestic market. However, there will be some cautiousness too with another rating agency Fitch Ratings projecting Indian economy to grow at a slower pace of 7.4 percent in the current fiscal and touch 8 percent growth only in 2018-19, as it expects the benefits of reforms and impact of monetary easing to kick in with a lag. There will be some buzz in PSU oil marketing companies, as the international oil prices dipped again weighed down by a rise in Iranian exports.

The US markets ended modestly lower in the last session, as traders coming out of the Deutsche fiasco looked ahead to the jobs report due out at the end of the week. The Asian markets have mostly made a positive start though the mood was a bit cautious following a retreat in US equities.

Back home, Indian equity indices witnessed a blockbuster performance on the first day of the week by vehemently rallying over a percentage points and re-conquering their psychological levels. Except for some mild profit taking in early afternoon trades, Monday’s session remained a day of recovery as key equity indices enthusiastically rallied through the day. Investors continued to build hefty positions across the board as sentiments got a boost with India’s core sector output rising to 3.2% in August on the back of sharp rise in steel production and a pickup in cement, suggesting a lift in infrastructure and construction activity. Steel production rose 17% to a 37-month high, aided by the low base of last year. Adding the optimism among the market participants, credit rating agency Crisil expects India's gross domestic product (GDP) to grow at 7.9 per cent and agriculture to grow above trend at 4 per cent. The country’s GDP will be supported by a boost from consumption especially in the hinterland after a well distributed monsoon this year. Some support also came with the report that foreign investors pumped in more than Rs 20,000 crore into the capital market in September, making it the highest net inflow in 11 months. Investors didn’t give any heed to geo-political tension arising between India and Pakistan Pakistani troops opened fire on forward areas along the LoC in Poonch district of Jammu and Kashmir.  Meanwhile, Auto stocks gained traction after many automakers posted a solid show in September ahead of the crucial festival season.  Certain power, fertilizer and CNG suppliers were also under the spotlight as price of natural gas for all these sectors were cut by 18 percent to $2.5 per million British thermal unit, it’s the fourth reduction in 18 months. On the global front, Asian markets ended mostly higher on Monday, while the European markets started the week little changed.Back home, finally, the BSE Sensex surged by 377.33 points or 1.35% to 28243.29, while the CNX Nifty ended up by 126.95 points or 1.47% to 8,738.10.