Markets likely to consolidate with a flat start ahead of a holiday

The Indian markets despite faltering in the mid after RBI’s policy announcement bounced back and closed with gains of around half a percent in last session. Today, the start is likely to be soft-to-cautious on weak global cues and the markets may consolidate after the series of gains. As the RBI declined to cut interest rates despite the government's latest effort, traders will now be eyeing the inflation data, as the apex bank has once again raised concern about the inflation.  Industry body, Assocham has said that it is deeply disappointed by the Reserve Bank of India’s decision to leave interest rates unchanged. The rupee movement too will be watched after it surged to four months high in last session. Real Estate companies might rejoice, as the commercial banks have been asked to focus on funding partially completed realty projects on a priority basis and developing projects in small towns. The steel stocks too may remain buzzing on report that steel imports continued to surge amid weak demand and rise in domestic output.

The US markets slipped marginally on Monday from their near five-year high on getting weak manufacturing data from New York state and sell off in energy stocks. Volume remained low and traders concentrated on issues in other parts of the globe. The Asian markets have made a mixed start with only few of the indices trading in green; there is cautiousness in the regional markets due to European debt crisis and worsening dispute between Japan and China.

Back home, after garnering over four percent last week, key domestic benchmarks prolonged their gains for the ninth day in a row on Monday following the FDI approvals in aviation, retail, power and broadcasting carriage services sectors post-market hours on Friday. The sentiments remained jubilant throughout the day’s trade but, the bourses trimmed their gains quite drastically in noon trade despite the Reserve Bank of India (RBI) slashing cash reserve ratio by 25 basis points to 4.5%, as market seemed to be expecting more than what the RBI delivered. Moreover, the RBI left repo and reverse repo rates unchanged while the CRR cut will release Rs 17,000 crore in liquidity. The central bank has been persistently saying that the inflation remains a challenge. Inflation increased to 7.55% in August as against 6.87% in July. Even though, markets were able to hold their gains till end and snapped the session at their highest close since July 2011 as several bankers hinted at reducing lending rates in the coming days, which was largely seen positive for the equity markets. Moreover, rate sensitive realty, capital goods and banking remained the major gainers after the RBI cut the CRR, or the amount of deposits that lenders must keep with the central bank. Sentiments also got boost from aviation stocks like Kingfisher Airlines, Jet Airways and SpiceJet, which also shot up after the government allowed 49% FDI in the sector. Retail stocks too aided the sentiments and stocks like Pantaloon Retail, Shoppers Stop, Trent and CESC rallied after the government approved 51% FDI in multi-brand retail sector. Meanwhile, Dish TV, WWIL, Den Networks and Hathway Cable climbed higher after receiving 74% FDI approval in broadcast carriage services. However, gains remain capped after shares of FMCG companies like ITC, Hindustan Unilever, Tata Global Beverages, Colgate, Dabur India and Nestle India fell as investors’ risk appetite improved after the government announced big-ticket reforms last week. Finally, the BSE Sensex gained 78.04 points or 0.42% to settle at 18,542.31, while the S&P CNX Nifty rose by 32.35 points or 0.58% to close at 5,610.00.