Markets to remain in consolidation mood with a flat start

The Indian markets continued their consolidation mood and ended flat with a negative bias in last session after the provisional headline inflation rate based on WPI for January, shooting up to a 30-month high of 5.25 percent as rising global crude oil prices spiked domestic fuel cost. Today, the start is likely to remain cautious and markets may extend their consolidation mood with fear of US Fed’s imminent rate hike in March. Traders however will get some support with India Ratings and Research (Ind-Ra) latest report that the Indian economy is likely to grow by 7.4 percent in the next fiscal year, however it has revised down GDP growth estimate for 2016-17 to 6.8 percent from 7.9 percent. Now traders will be eyeing the 10th meeting of the all-powerful GST Council this weekend, where a critical anti-profiteering clause in the draft Goods and Services Tax law to ensure that the benefit of lower taxes gets shared with consumers is likely to be finalized. There will be lots of result reactions to keep the markets buzzing during the day.

The US markets continuing their bull run reached new record highs in the last session, on the heels of Federal Reserve Chair Janet Yellen's semiannual monetary policy testimony before the Senate Banking Committee, where she hinted of rate hike. The Asian markets have made mostly a positive start led by the Japanese market that surged on weakness in yen after Janet Yellen said the Federal Reserve doesn’t need to wait for the Trump’s administration’s plans on fiscal stimulus to hike rates.

Back home, Indian frontline equity indices prolonged the lull for yet another day and finished the session on a dull note, marginally below the neutral line, as investors at large remained reluctant to build long positions ahead of Fed Chairwoman Janet Yellen's semiannual testimony before Congress. The session largely remained characterized by choppiness as the aimless indices moved in tight-range throughout the day. Sentiments tuned dismal after Wholesale inflation shot up to a 30-month high of 5.25% in January as rising global crude oil prices spiked domestic fuel cost, even as food prices moderated. The overall inflation index of the fuel and power segment surged to 18.44% from 8.65% in the previous month. However, Retail inflation, measured in terms of Consumer Price Index (CPI), fell to a 5 year low of 3.17% in January mainly on account of declining prices of food items including vegetables and pulses. Although micro-indicators of inflation showed mixed picture, many experts believes that significant fall in CPI base inflation is result of demonetization and it will not maintain its current range, while WPI base inflation will increase if the crude oil prices continued to rise. Further, trading sentiments remained subdued with a private report 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% in the January-March period amid subdued activity. However, investor got some comfort 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. On the global front, Asian markets ended mostly lower on Tuesday as investors turned jittery ahead of testimony by the head of the Federal Reserve, which could highlight the likelihood of two or more U.S. interest rate hikes this year. Back home, finally, the BSE Sensex declined by 12.31 points or 0.04% to 28339.31, while the CNX Nifty was down by 12.75 points or 0.14% to 8,792.30.