Markets likely to get a flat-to-positive start after a day of break

The Indian markets added another half a percent on Tuesday and the benchmarks managed to cross their crucial psychological levels. The surprise from the inflation front helped the domestic gauges to move higher. Today, the start is likely to remain flat-to-positive; however there is not much to take the markets higher and the trade may remain range bound. The worries of deficient rain and draught like situation is likely to keep markets under pressure, rice production is poised to slump from a record, as the worst monsoon since 2009 has reduced planting. Meanwhile, the banking sector is likely to remain buzzing as the RBI has issued draft guidelines to limit the exposure of banks to their group companies, mainly to avoid a systemic risk in the financial sector in future. The steel sector too will remain active after the report that India’s steel imports continued to rise on rising consumption. Also, there will be lots of scrip specific movements, Maruti will announce its plans to re-open the Manesar production plant and also deliberate on its future strategy, there will be lots of result announcements too.

The US markets remained in consolidation mood for the third consecutive day, major indices made a mixed closing. Though, the economy news was good, as US industrial output expanded 0.6 percent last month, it’s fastest since April, but the volume remained low ahead of options expiry. The Asian markets have made a mixed start though Chinese Premier Wen Jiabao hinted for some stimulus by saying that easing inflation is allowing room to adjust monetary policy. However, traders were waiting for more clues over the timing and extent of any further stimulus.

Back home, Indian stock markets staged a smart performance on Tuesday as the frontline indices settled above important psychological levels and extended the gaining streak for the second straight session. Though, the bourses, in the first half, traded cautiously near their pre-close level awaiting July inflation figure. But, the encouraging WPI inflation numbers for July provided the much needed support to the local markets and prevented downside chances for the bourses. The wholesale price index (WPI), India’s main inflation gauge, unexpectedly slipped at 6.87% for the month of July, its lowest since January 2010, as compared to 7.25% (Provisional) for the previous month and 9.36% during the corresponding month of the previous year. The fuel group inflation came in at 5.98% versus 10.27% during the previous month. Food article inflation lowered to 10.06% compared to 10.81% and the primary article inflation was at 10.39% versus 10.46% on a month on month basis. The investors piled up positions in the rate sensitive counters like Banking and Auto post the announcement of lower than expected inflation numbers on expectations that the pressure on Reserve Bank of India (RBI) will now increase to cut rates to prop up the country’s economy growth momentum. Global cues too remained supportive as all the Asian markets went home with green mark as several board members of Bank of Japan in the last meeting said that the central bank should not dismiss any policy options in combating risks to the economy. However, gains remained capped as deficiency of rainfall became a cause for worry as it may add pressure on some commodities. Subbarao stuck to a hawkish tone, reiterating concern about sticky inflation and once again prodding the government to do its bit by reigning in its fiscal profligacy. Finally, the BSE Sensex gained 94.75 points or 0.54% to settle at 17,728.20, while the S&P CNX Nifty rose by 32.45 points or 0.61% to close at 5,380.35.Indian markets remained closed on Wednesday on account of Independence Day.