Markets to make a flat start; December inflation numbers to give direction

The Indian markets ended flat on Friday, the mood got dampened by the weak industrial production data, offsetting better than expected Infosys numbers and traders opted to book some profit. The trade is likely to remain cautious today ahead of the Inflation numbers for the month of December; street is expecting the numbers to be more or less same as last time. Any downside coupled with the weak IIP number can strengthen the expectation of RBI’s rate cut in its upcoming policy review. Though, traders may get some support with top secretaries of the finance ministry asserting that the fiscal deficit will be contained at 5.3% of the GDP, which is the revised Budget estimate for 2012-13. Telecom stocks will be in action as the government has reportedly asked telecom operators to pay the first instalment of Rs 8,115.68 crore of one-time spectrum fee by January 15. In November, the government decided that the operators should pay for holding spectrum above 6.2 MHz retrospectively, from July 2008 to January 1, 2013.Traders will also be looking for announcements on a hike in diesel and LPG prices after the oil ministry sent a proposal for an increase to the cabinet last week. Third quarter earnings too will be creating buzz in the market and  after the surprise from Infosys, traders will be eyeing the results of another IT major TCS, there are few other important result slated to be released today, including Electrosteel Castings, Muthoot Finance etc.

The US markets came in consolidation mood on Friday, traders were cautious with the ongoing result season and the unexpected widening of the trade deficit. The Asian markets have made a mixed start. While the Japanese market is closed today, others are swinging between red and green in early trade.

Back home, extending their consolidation mood, key domestic benchmarks ended the volatile session on a flat note on Friday as investors opted to trade cautiously ahead of December inflation data scheduled next week which is likely to decide the stance of Reserve Bank of India’s monetary policy on January 29. Both the gauges traded firm during the early part of the day supported by shares of information technology (IT) companies, which remained on buyers’ radar after Infosys reported a better-than-expected net profit for the third quarter ended December 2012 and upped its full year guidance. Infosys rallied about 17 percent, its sharpest single day gain in past one decade on the Bombay Stock Exchange (BSE). Tata Consultancy Services (TCS), Wipro, Mahindra Satyam, Hexaware Technologies, CMC and Tech Mahindra too edged higher by 2-4 percent. However, gains remain capped on growth recovery concerns in Asia’s third-biggest economy after weaker-than-expected November industrial output. India’s index of industrial production (IIP), measuring output at factories, mines and utilities, contracted by 0.1 percent in November following a revised 8.3 percent  rise in October. Meanwhile, India's trade deficit lessened to $17.7 billion in December from $19.3 billion in recorded November 2012. Exports fell 1.9% year-on-year to $24.88 billion in December, whereas improved when compared to $22.3 billion recorded in November 2012. Selling got intensified on the street as India’s trade deficit in December widened due to an increase in imports, mainly of crude oil. The trade gap increased to $17.7 billion in December from $14.7 billion a year earlier, but narrowed from $19.3 billion in November. Global cues too remained sluggish as most of the Asian equities ended in red on Friday barring Japanese stocks that ended higher for the ninth consecutive week, the market's longest consecutive weekly climb since 1988. Back home, the sentiments also got dampened after C Rangarajan commented that country’s headline inflation may miss the expected 7 percent-mark by this fiscal-end if the government goes ahead with increasing administered prices of diesel. Selling in rate sensitive too dragged the markets into the red. Sectors like, Auto, Realty and Banking all declined by over a percent ahead of Reserve Bank of India’s monetary policy on January 29.Finally, the BSE Sensex rose 0.09 points to settle at 19,663.64, while the S&P CNX Nifty declined by 17.35 points or 0.29% to end at 5,951.30.