Markets likely to get a soft-to-flat start on sluggish global cues

The Indian markets went for a good rally in last session with benchmarks re-tracing their long lost levels. Decline in the CPI inflation raised some hopes of rate cut by RBI, while there was widespread buying in the bluechips taking the markets higher by over a percent. Today, the start is likely to be soft-to-cautious as the global cues are not supportive. On the domestic front too, there is not much happening that could take the markets in either direction. However, there is not good news for the oil marketing companies as the minister of state for petroleum R P N Singh has said that the government is not planning to give up its control over diesel, cooking gas and kerosene prices by withdrawing subsidy on them. While, the microfinance companies may be buzzing as they are expected to approach the central bank for higher margins. Banks unions are on strike today so the rupee trading too might get impacted and amid low volume it too is not likely to give any direction to the equity markets.

The US markets despite a good start and S&P managing to touch its four year high, ended lower on Tuesday, hopes that central banks will act in the near future to stimulate the global economy took the markets higher but profit taking, mainly in the technology stocks took the markets lower. The Asian markets made a soft start and barring few most of the indices are trading in red. Japan reporting a wider than expected trade deficit has weighed on the sentiments.

Back home, buoyed by sanguine global cues, bulls retaliated on Dalal Street after a long weekend and Indian equity markets kick started the week’s trade on a jubilant note with Nifty hitting its 5,400 milestone for the first time since March 16 while the BSE Sensex comfortably surpassed the 17,800 mark. However, the frontline gauges showed side-ways movement in the start of session and traded around the psychological 5,400 (Nifty) and 17,800 (Sensex) levels through the morning trades. But, the key gauges succeeded in coming out of their range bound trajectory in afternoon trades and trended northwards ending the session near day’s high, thanks to the rally in Software, Power, Technology and Auto counters. The sentiments were mainly supported by software pack and stocks of Infosys, TCS, Wipro and HCL Technologies edged higher on hopes of economic recovery of the US, the biggest outsourcing market for Indian IT firms. Moreover, rise in tyre companies too aided the sentiments. Stocks like Ceat, JK Tyre & Industries, Apollo Tyres, MRF surged by 2-10 percent as lower rubber prices will boost profitability. Natural rubber is a key raw material in tyre manufacturing. Rubber futures in Tokyo plunged 59% from a record in February 2011 as the economy slowed in China, the world’s largest auto market. In addition, companies operating mutual fund business also added buoyancy in the market as shares of HDFC, Aditya Birla Nuvo, Reliance Capital, IDFC and ICICI Bank edged higher after market regulator announced a number of measures to increase the penetration of mutual fund products and energizing distribution network. India’s CPI inflation (base year 2010) moderated to 9.86% y-o-y in July from 9.93% in June. The moderation was mainly due to positive base effects on fuel inflation created by the hike in administered prices a year ago and a moderation in the miscellaneous category because of a decline in the cost of transportation services. As a result, core CPI inflation (ex-food and fuel) moderated to 8.9% y-o-y from 9.2%. Food inflation inched higher to 11.5% y-o-y in July from 10.8% in June due to rising prices of cereals and pulses. Finally, the BSE Sensex surged 194.18 points or 1.10% to settle at 17885.26, while the S&P CNX Nifty soared by 54.70 points or 1.02% to close at 5,421.00.