Markets likely to make a cautious start of the new week

The Indian markets made a modest bounce back on the last trading session, supported by unexpected decline in inflation figures, which raised hopes that RBI now may consider lowering rates. Today, the start is likely to be cautious and traders will be eyeing the RBI’s mid-quarter monetary policy review to be announced tomorrow, however RBI is not expected to cut repo rate and the street is expecting a cut in the cash reserve ratio. Though, there will be some confidence in the markets, as the Prime Minister Manmohan Singh has said that the steps taken on the economic front were 'only the beginning of a process' and there would be no looking back, he said the government was committed to doing everything that is possible to alter the policy environment, accelerate economic growth and make growth socially and regionally more inclusive. Prime Minister further said that now reforms in GAAR, the IT, Railways and pharma sectors, land acquisition, taxation, disinvestment and subsidies are next on target. There will be buzz in the oil & gas stocks, as a panel headed by C Rangarajan, Chairman Prime Minister’s Economic Advisory Council has recommended the end of the controversial system of oil firms recovering their costs from sale of oil and gas in all future contracts and suggested a transparent structure for sharing the output between the government and the contractor.

The US markets continued their decline on Friday as the budget talks were not showing reaching any solution and traders opted to remain on side lines. The Asian markets have mostly made a soft start, though the Japanese market was outperforming its peers as yen weakened on hopes of more monetary policy by the central bank.

Snapping their five days losing streak, Indian equity benchmarks ended the session near their intraday high supported by gains in rate sensitives like banking, auto and realty space after lower-than-expected inflation data re-ignited the hopes that Reserve Bank of India (RBI) will cut interest rates in its upcoming monetary policy review on December 18, 2012. The wholesale price index (WPI), India’s main inflation gauge, in a big relief, unexpectedly cooled down to 7.24 per cent for the month of November 2012 as compared to 7.45 per cent for October and 9.46 per cent during the corresponding month of the previous year, thereby registering second consecutive decline. Meanwhile, primary articles inflation rose to 9.42 per cent as against 8.21 per cent in the previous month. The food articles inflation also rose to 8.5 per cent as compared to 6.62 per cent in October. However, frontline gauges slowed their momentum in noon trade following sluggish cues from European counters. Back home, market regained their strength supported by rally in realty stocks which rose higher on reports that the Union Cabinet has cleared the new land acquisition bill, paving way for its introduction in the ongoing winter session of the parliament. Stocks like, Prestige Estates, Indiabulls Real Estate, DLF, DB Realty, Anant Raj Industries and Godrej Properties edged higher in the trade. Markets fast-tracked their pace in the last leg of trade supported by metal space, which surged over two percent as Chinese vast manufacturing sector expanded in December at its fastest pace in 14 months as new orders and employment rose. The HSBC flash purchasing managers' index for December rose to 50.9, the highest level since October 2011 and the fifth straight monthly gain. A figure above 50 indicates that growth is accelerating, while one below 50 shows slowing growth.  Back home, some support also came in from fertiliser space as shares of companies like, Chambal Fertilisers & Chemicals, National Fertilizers, Rashtriya Chemicals & Fertilizers etc rallied during the day after the Cabinet Committee on Economic Affairs, approved a urea investment policy, which is likely to incentives fertiliser companies to set up new plants and expand existing capacity. Finally, the BSE Sensex gained 87.99 points or 0.46% to settle at 19,317.25, while the S&P CNX Nifty rose by 28.10 points or 0.48% to end at 5,879.60.