Markets to make a strong start on positive global cues and rate cut hopes

The Indian markets after a choppy day of trade ended with modest gains in the last session, caution ahead of key macro data as well as Fed Chair Janet Yellen's testimony kept the gains under check. Today, the start is likely to be in green on positive global cues and on hopes of rate cut by Reserve Bank of India after the industrial output growth dropped to 1.7 percent in May from 8 percent in the same month last year. On the other hand, retail inflation hit new low of 1.54 percent in June, down from 2.18 per cent in May. Tepid data of industrial output coupled with record low inflation figures have rekindled hopes of a rate cut when the RBI reviews its monetary policy on August 2. Though, there will be some cautiousness too, with Chief Economic Adviser Arvind Subramanian’s statement that the historically low level of retail inflation at 1.54 percent in June reflects the firm and ongoing consolidation of macro-economic stability and that all policy makers look at data “very, very carefully”.  There will be some support to the markets with ratings agency Fitch report that the global sovereign credit cycle is likely to turn less negative in 2017 as the global GDP growth forecast for 2017 and 2018 had improved. The whole IT sector stocks will be buzzing today, with TCS, the largest domestic IT firm by sales slated to announce its first quarter numbers.

The US markets bounced back and posted good gains in the last session with Dow reaching a record closing high in reaction to Federal Reserve Chair Janet Yellen's remarks before the House Financial Services Committee. Yellen noted that there remains uncertainty about the outlook for inflation and said the Fed will be monitoring inflation developments closely in the months ahead. The Asian markets have made mostly a positive start and some of the indices are up by over half a percent in early deals after Janet Yellen signaled the Federal Reserve won’t rush to tighten monetary policy.

Back home, Continuing their record closing streak, Indian equity benchmarks ended the range-bound session with a gain of around quarter a percent, with frontline gauges settling above their crucial 9,800 (Nifty) and 31,800 (Sensex) levels for the first time ever. Sentiments remained upbeat for most part of the day’s trade with statement of Revenue Secretary Hasmukh Adhia that the Goods and Services Tax (GST) will help bring down the inflation by one to two percent by the end of this year. He also said that the government’s objective is to ensure that inflation does not increase, and added that the government has tried to keep items frequently used by the consumers under the lower tax bracket. Traders also took some encouragement with Finance minister Arun Jaitley’s statement where he called for more credit disbursement towards the unorganized sector, saying it will help push employment growth. Jaitley said diverting resources of banks and financial institutions through various schemes towards the unorganized sector will help create more jobs in the country. However, gains remained capped, as traders opted to stay away from taking positions in risky assets ahead of the IIP and inflation data to be announced after the market hours today. Also, the street is keeping an eye on corporate earnings for further direction including Tata Consultancy Services scheduled on Thursday and Infosys on Friday. Some pressure crept in during the trade after CRISIL said that the sharp appreciation in the rupee against the dollar in recent months is likely to have dented the first-quarter (current fiscal) profitability of exporters that source locally and have limited pricing power. Finally, the BSE Sensex gained 57.73 points or 0.18% to 31,804.82, while the CNX Nifty was up by 30.05 points or 0.31% to 9,816.10.