Markets to get a mildly positive start; RBI’s policy review eyed

The Indian markets rallied in the last session, traders coming after a long weekend went for hefty buying, with auto stocks remaining in lime light on robust sales data. Today, the start of the important day is likely to be in green but traders will remain cautious ahead of the RBI's monetary policy review due out later in the day. This will be the fourth bimonthly monetary policy review of FY2017-18. With inflation firming up and the rupee coming under pressure, the general view is that RBI will keep the policy rates unchanged. Traders will however be getting some support with report of core sector output growing at its fastest pace in five months in August, driven by higher coal and electricity production. The output grew 4.9 percent in August compared with a revised 2.6 percent year-on-year growth in July. Meanwhile, the government sees the decline in growth as a hiccup and expects the economy to pick up pace in the second half of the year as teething troubles with GST get resolved and the effect of demonetisation wanes. There will be some buzz in the oil & gas sector stocks too, as the government has reduced basic excise duty rate on both branded and unbranded petrol and diesel by Rs 2 per litre. The Finance Ministry said that this has been done to cushion the impact of rising international prices of crude petroleum oil, petrol and diesel on their retail sale prices. Also a report by Moody's has said that India will surpass China as the fastest-growing Asian market for petroleum products in 2018, on the back of a 6 per cent demand growth.

The US markets continued their upmove in the last session and with the upward move on the day, the major averages climbed to new record closing highs, as traders seemed optimistic about the economic outlook and the prospects for Republican tax reform. The Asian markets have made mostly a positive start with China’s markets on a week-long holiday and South Korea and Taiwan too closed for a holiday.

Back home, Tuesday turned out to be a fabulous day of trade for Indian equity benchmarks, with frontline gauges garnering gains of around three fourth of a percent ahead of RBI monetary policy review begins today and the decision is due tomorrow. This has led to unabated buying by domestic financial institutions, which added to the positive mood. Sentiments remained jubilant since start with bourses making gap-up opening, as traders took encouragement with Finance Minister FM Arun Jaitley’s indication that the government would consider reducing the goods and services tax slabs and easing compliance burden for small taxpayers once revenues from GST better those from the previous tax regime. Some support also came after Industry body Assocham urged the government to relax fiscal deficit targets and boost public expenditure as a means to accelerate India’s economic growth, which slipped to 5.7 percent in the June quarter. Former RBI Governor C Rangarajan also said that the government needs to “pick up very fast” to be able to maintain a healthy annual growth.  Markets maintained the bullish momentum and traded with jubilation till end as some support came after the Nikkei India Manufacturing Purchasing Managers’ Index, or PMI, remained unchanged at 51.2 in September. As per the report, September data painted an encouraging picture as the sector continued to recover from the disruptions caused by the introduction of the GST in July. Adding to the optimism, the Centre has begun a slew of measures to boost medium and small scale industries, exports and the textile sector. As per report, September 27 Cabinet meeting had discussed proposals related to providing stimulus to medium and small-scale industries, exports and the textile sector which have not performed to their optimum strength in last few quarters. Finally, the BSE Sensex surged 213.66 points or 0.68% to 31,497.38, while the CNX Nifty was up by 70.90 points or 0.72% to 9,859.50.