Markets to get a cautious start, may strengthen in latter trade

The Indian markets suffered profit booking in the last session and witnessed cut of about a percent, as the rupee too pared its gains and the traders remained cautious about the macro economic data. Today, the start is likely to be cautious as the global cues are not indicating any firm trend but the domestic cues are good and may support the markets in latter trade, as the industrial production climbed 2.6% in July from a year earlier, much better than the general street expectation of marginal contraction-to-flat numbers and far better than -2.2% figure of the last month. In other development, retail or CPI inflation, eased slightly to 9.52% in August over the previous month’s 9.64%, following softening in prices of almost all commodities, except vegetables. There will be buzz in the oil & gas sector and the PSU oil marketing companies may be in somber mood as the government will decide on raising the retail prices of diesel and cooking gas (LPG) in a few weeks. Meanwhile, Petroleum Secretary has said that implementing a gas price pooling mechanism in the country is feasible. However, the Finance Ministry will have to take a call on whether the Government can bear an additional subsidy burden of nearly Rs 24,339 crore.   

The US markets ended modestly lower on Thursday, there was profit taking in somewhat subdued day of trade that led the markets lower, though the  jobless claims unexpectedly dropped to a seven-year low but there was not much clarity on the data, as two states failed to report all of their claims. Most of the Asian markets have made a soft start and are on course of snapping their longest winning streak for the year.

Back home, snapping five days gaining streak, Indian equity benchmarks ended Thursday’s session in the red with a cut of over a percentage point and frontline indices tumbling below their crucial 5,900 (Nifty) and 19,800 (Sensex) levels, as investors opted to stay away from taking positions in risky assets ahead of IIP data for the month of July to be announced after the market hours, which despite being in contraction mood is likely to come better than last month’s figure of -2.2 percent. Traders also awaited consumer price inflation numbers, which too may come marginally lower in August, as compared to 9.64 per cent registered in the month of July. Sentiments remained down-beat since morning and markets soon after opening in green, slipped into red extending southward journey, as rating agency Crisil cut India’s economic growth estimate to 4.8 percent for the current fiscal and said agriculture is the only hope for higher rate of expansion in this period of downturn. Selling got intensified after European markets made a sluggish opening ahead of a crucial meet between the US and Russia over the Syrian government’s chemical weapons stock pile. Back home, markets continued reeling under pressure throughout the session as profit booking in the blue-chip stocks continued for the second day in a row. Sentiments also got weighed down after Indian rupee weakened due to dollar demand from oil importers and defense related payments. The rupee was trading at Rs 63.70 at the time of equity markets closing as compared to its previous close of Rs 63.37 per dollar. Reserve Bank of India’ Governor Raghuram Rajan’s statement that India’s slowing economy and its massive current account and fiscal deficits are not structural problems and can be fixed with modest reforms, too was unable of soothing the sentiments. Selling in public sector oil marketing companies too dampened the sentiments. Stocks like BPCL, HPCL and IOC all edged lower as international crude oil prices inched higher EIA weekly report showed US crude stockpiles to have declined and with diminishing likelihood of a US attack on Syria after the beleaguered country agreed to a Russian proposal to hand over its chemical weapons for destruction. Additionally, most of the software stocks too declined. Finally, the BSE Sensex lost 215.57 points or 1.08% to settle at 19781.88, while the CNX Nifty lost 62.45 points or 1.06% to end at 5,850.70.