Markets to make a cautious but green start

The Indian markets continued their consolidation mood and once again made a flat closing in last session, some weak earnings updates from the major companies weighed on markets. Today, the start is likely to be cautious on mostly a lower start of the regional peers, however traders will be getting some encouragement with retail inflation easing to 3.17 percent in January, its lowest level in at least five years, mainly due to a drop in the annual food inflation, which stood at 0.53 percent last month, lower than 1.37 percent in December. Markets will also be getting some support with Finance Minister Arun Jaitley’s statement that the Modi government's emphasis is on bold decision making and a clean economy with business friendly environment, the returns of which can be spent on the poor. Meanwhile, the Chief Executive Officer of NITI Aayog Amitabh Kant has said that US President Donald Trump will soon realise that protectionist measures like restrictions on H1B visa will impact America itself. There will be some buzz in the dye and chemical stocks on report that China has launched anti-dumping and countervailing duties investigations against some Indian manufactures for allegedly exporting a chemical product - widely used in dyes and pharmaceutical. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets extended their upmoves in last session to reach fresh record highs, on optimism about reduced corporate taxes under President Donald Trump. Though there was not much activity in the market lacking any major U.S. economic data. The Asian markets have made  mostly a lower start with the rally fizzling out, traders are pricing in a 30 percent chance the US Fed will lift rates at its March 15 meeting. Japanese market too was in red ahead of Bank of Japan governor Haruhiko Kuroda’s speech later in the day.

Back home, Indian benchmark indices ended the range bound day of trade on a flat note with positive bias as investors remained on the sidelines and refrained from any buying activity ahead of the key consumer price inflation (CPI) data due later in the evening. The CPI-based inflation is likely to come down in January to the lowest in the new series due to subdued demand post-demonetization and base effect before spiking up again in the next two months. Sentiments got some support with a report that the government’s revenue collection during April-January, 2016-17 has shown healthy growth, indirect tax collection jumped 23.9 percent to Rs 7.03 lakh crore on the back of robust central excise mop-up, while direct tax collection rose by 10.79 percent to Rs 5.82 lakh crore. The total direct and indirect tax collections at the end of January stood at Rs 12.85 lakh crore, more than half the Rs 16.26 lakh crore target for 2016-17. Some support also came in from reports that after four months of intense selling, overseas investors turned net buyers in February and have so far pumped in over Rs 5,800 crore in the capital market. The latest inflow followed a net pullout of Rs 80,310 crore from equity and debt together in the past four months (October-January). However, gains remained capped with the report that Industrial production contracted in December 2016 due to a sharp decline in production of consumer goods, confirming a demonetisation led contraction in demand. Index of Industrial Production (IIP) was 0.4% lower in December 2016 from the same period a year ago. The number was well below the 5.7% growth in November and consensus expectation of around 1% growth in December. Adding anxiety among investors, the Nomura’s report indicated that India's economic growth is likely to remain muted in the first quarter of this calendar year with the GDP likely to grow at 5.7 per cent in the January-March period amid subdued activity. Finally, the BSE Sensex gained 17.37 points or 0.06% to 28351.62, while the CNX Nifty was up by 11.50 points or 0.13% to 8,805.05.