Markets to extend gain with a positive start

The Indian markets surged in last session and the benchmark indices neared their over six months high with Sensex surpassing 18000 mark, though the industrial output data came worse than expected but it raised hopes that now RBI may go for a rate cut in its upcoming monetary policy review. Today, the start is likely to be marginally in green and the indices may extend their gains. After the dismal IIP numbers the Commerce and Industry Ministry will hold a high-level meeting of State Chief Secretaries and Principal Secretaries to give a fillip to the manufacturing sector. Meanwhile, apex industry body CII has expressed their deepest concern on the industrial production numbers and asked for early implementation of non-legislative policy measures, they too have stressed on the need to cut interest rates by the Reserve Bank in order to boost the sentiment. The PSU sector is likely to remain buzzing ahead of the Cabinet Committee on Economic Affairs (CCEA) meet on Friday to consider some big ticket decisions on disinvestment in five major public sector undertakings. Traders will also be eyeing the movement of rupee, which is likely to improve further and support the equity markets sentiment. The markets are also likely to remain buzzing with the brewing up competition among the bourses, as after new entrant MCX-SX announced transaction charges up to 50% lower than that of NSE, the National Stock Exchange of India has said that its capital market trading members will be allowed to set off their annual subscription charges of Rs 1,00,000 against transaction costs.

The US markets extended their gains on Wednesday with major indices adding modest gains supported by the ruling of the German court permitting the ratification of the euro zone’s new bailout fund. However, the mood remained cautious ahead of the Federal Open Market Committee’s two days meeting. The Asian markets have made a mixed start with some indices marginally trading in red awaiting a Federal Reserve policy decision in US. Chinese market was down led by the decline in material and industrial companies.

Back home, Indian equity markets snapped yet another session in the green territory with the frontline equity indices amassing about a percent gain and extending the gaining streak for sixth consecutive session. The Sensex surpassed 18,000 level while, Nifty crossed 5,400 mark for the first time since March 14, despite a disappointing report on industrial production for the month of July, as sentiments remained jubilant on hopes for fiscal reforms after the aviation minister expressed hopes that the government would allow foreign direct investment into the sector. The gauges, throughout the session, exhibited strong traction, but trimmed some of their gains in mid noon trade on the back of disappointing July industrial output data. India’s industrial production barely moved in July, as weakness persisted in the critical areas of the economy such as manufacturing, mining and capital goods amid sticky inflation, high interest rates, fragile currency, global slowdown and policy paralysis. The combined output of factories, mines and power utilities, as measured by the IIP, inched up by a measly 0.1% in July 2012 as against expectations of a 0.5% growth. India’s industrial output was at 3.7% in July last year.  However, the domestic bourses regained their strength tracking a risk-on mood globally, after Germany’s top court backed the legality of the euro zone bailout funds, although with conditions. German court has allowed ratification of ESM under certain conditions and rejected complaint against ECB bond buys. Back home, investors would be awaiting the release of August month’s inflation data, for further cues on RBI’s stance in its upcoming monetary policy review. Consensus estimate is that India's rate of inflation would probably pick up in August to 6.95 percent year-on-year in August, from July's three-year low figure of 6.87 percent, on account of poor summer rains, which probably drove up food prices. Metal space too provided the front line indices a much needed support as stocks like Jindal Steel, Tata Steel, Sterlite and Hindalco recovered on short covering and value buying at lower levels after recent losses. The BSE Sensex gained 147.08 points or 0.82% to settle at 18,000.03, while the S&P CNX Nifty rose by 41.00 points or 0.76% to close at 5,431.00.