Markets to make a soft-to-cautious start on latest geo-political worries

The Indian markets after a choppy day of trade and losing their initial momentum, managed a modestly positive close in last session and overlooked the report that country's wholesale price inflation (WPI) rose to a four-month high of 3.24 percent in August. Today, the start is likely to be a bit cautious on North Korea’s new provocative move of firing another ballistic missile over Japan.  There will be some concern with SBI research report stating that country’s GDP is likely to remain below 6 percent in the second quarter of 2017-18 owing to muted agriculture growth and sluggish performance of manufacturing and mining sector. Meanwhile, a United Nations report has said that effects of demonetisation and rollout of the Goods & Services Tax regime on the informal sector and reduction in pace of credit creation may affect India’s growth prospects and the country unlikely to serve as the “growth pole’’ for the global economy in the near future. There will be some buzz in the textile sector, as the Textile Commissioner has said that country’s technical textile market has huge growth potential and it is expected to grow at 12 per cent per annum to reach $23 billion (Rs 1,50,000 crore) in 2020. There will be some buzz from the primary market too, as the ICICI Lombard General Insurance IPO will kick off today.

The US markets made a mixed closing in the last session and while the Dow climbed to a new record closing high, the Nasdaq and S&P 500 ended in negative territory, following the release of a Labor Department report showing a bigger than expected increase in consumer prices in the month of August. The Asian markets have made a mixed start and some of the indices are in red, though the Japanese market was trading marginally in green showing a muted broader market reaction to the latest North Korean provocation, as it fired missile over Japan after UN sanctions.

Back home, Indian equity benchmarks ended the choppy day of trade with slender gains on Thursday, as initial optimism fizzled out in second half and market pared most of their gains. Markets started the session on positive note with traders taking encouragement with private report stating that India’s GDP growth is expected to be around 7.1% this fiscal following a likely pick up in industrial production as firms resort to restocking post GST especially ahead of festive season. Some support also came with report that industry body ASSOCHAM has sought from the government slew of tax relief for companies against whom insolvency proceedings have been initiated. It added that the resolution plans approved after factoring in these reliefs/concessions will result in quick revival of assets, freeing up liquidity for banks for further lending, increased economic activity, job creation, increased contribution to the exchequer and will have multiplier effect on the associated economy. However, markets took U-turn in noon deals and pared most of their initial gains after the sharp rise seen in CPI based inflation, the latest data released by the government has shown that the WPI inflation rate too registered significant increase in August month. Surge in prices of foods articles, vegetable and  fuel products mainly pulled the country’s WPI higher to 3.24% in August against 1.09% increase in the same month a year ago and 1.88% recorded in the previous month. Sentiments also remained dampened on report that India has been placed at a low 103 rank, the lowest among BRICS economies, on the WEF’s Global Human Capital Index, which has been topped by Norway. India also ranks among the lowest in the world when it comes to the employment gender gap. Finally, the BSE Sensex rose 55.52 points or 0.17% to 32,241.93, while the CNX Nifty was up by 7.30 points or 0.07% to 10,086.60.