Markets to make a soft to cautious start on rise in inflation

The Indian markets went for another sell-off in the last session and major benchmarks deposed around a percent on sluggish industrial output data and some weak earnings. Today, the start is likely to remain cautious and traders will be concerned with retail inflation accelerating more than expected in October. Inflation quickened to 3.58 percent in the month, the fastest pace in seven months, from 3.28 percent increase in September. Traders will however be getting some support with Finance Minister Arun Jaitley’s statement that there is scope for further rationalisation of GST rates and revenue buoyancy will decide the course of rationalization. He however, ruled out single tax rate of GST, saying those seeking single rate have no understanding of tariff structure. There will be some support with a private report that India is likely to achieve strong growth over the next decade and will overtake Japan in nominal GDP by 2028, to emerge as the world's third largest economy. Manufacturing sector stocks are likely to be in action, as the Prime Minister Narendra Modi has said that the Indian government wants to make the country a Global Manufacturing Hub. He said, "We want to make India a global manufacturing hub and we want to make our youngsters job creators." Apart from a long list of earnings announcements, there will be buzz from the primary market too, where Footwear retailer Khadim India will list on the bourses today, the IPO was subscribed 1.90 times.

The US markets coming off their early weakness posted modest gains in the last session, though the traders remained concerned about the outlook for tax reform. The Asian markets were showing a mixed trend in early deals with investors awaiting clues on monetary policy from heads of some major central banks and kept an eye on US tax reform developments.

Back home, Indian equity benchmarks started the new week on pessimistic note with frontline gauges ending near intraday low levels, breaching their crucial 10,250 (Nifty) and 33,100 (Sensex) levels, as traders stayed away of risky assets, keeping an eye on the ongoing tensions in the West Asia. Soon after a positive start markets entered into red terrain, as traders reacted negatively to industrial output growth data which fell to 3.8% during the month of September from a revised 4.5% rise in August. The slowdown was mainly due to subdued performance of the manufacturing sector, coupled with contraction in output of consumer durables. Manufacturing sector, which accounts for more than three-fourths of the entire index, slowed to 3.4% in September, from 5.8% in the same month previous year. Afterwards markets never looked confidant and extended their southward journey to at day’s lows.  Sentiments remained dampened on reports that investments in the Indian capital market through participatory notes (P-notes) plunged to an over eight-year low of Rs 1.23 lakh crore at September-end in view of stringent norms put in place by regulator Securities and Exchange Board of India (SEBI). According to SEBI data, the total value of P-notes investments in Indian markets - equity, debt and derivatives - slumped to Rs 1,22,684 crore at September-end after hitting seven-and-a-half year low of Rs 1,25,037 crore at the end of August. Traders failed to get any sense of relief with report that foreign investors have pumped in a staggering $1.5 billion in the Indian equity markets this month during November 1-10, propelled by the government’s Rs 2.11 lakh crore bank recapitalisation plan. This follows a net inflow of over Rs 3,000 crore in stock markets last month. Prior to that, FPIs had pulled out more than Rs 24,000 crore in the past two months (August and September). Finally, the BSE Sensex declined 281.00 points or 0.84% to 33,033.56, while the CNX Nifty was down by 96.80 points or 0.94% to 10,224.95.