Markets to continue trading cautiously ahead of Fed meet

The Indian markets suffered profit booking in last session and despite a strong start could not hold up to their gains, and closed flat after the WPI inflation data for the month of August unexpectedly topped six percent mark. Today, the start is likely to remain cautious as the global cues too remains watchful for the Fed’s action, while on the domestic front the overhang of sudden and sharp rise in inflation will continue. Meanwhile, Prime Minister's key economic advisor C Rangarajan, pitching for a non-restrictive regulation in the financial sector has said that too many norms can impede financial innovations. There will be buzz in the infra sector, as today the Cabinet Committee on Investment (CCI) headed by the Prime Minister is likely to consider seven stalled mega infrastructure projects, envisaging investment of around Rs 1.6 lakh crore. Traders will also be eyeing the movement of rupee which has strengthened further in last session, while the PSU oil marketing companies too will be watched, as it has been reported that underrecovery on diesel for the second fortnight of this month rose to Rs 14.50 a litre, compared with Rs 12.12 a litre in the previous fortnight, boosting the government’s plan to opt for a steep diesel price rise.

The US markets ended mostly higher, extending their gains into new week, markets were rejoicing the news that former Treasury Secretary Larry Summers has withdrawn his name from consideration to replace Federal Reserve Chairman Ben Bernanke. The Asian markets have made a mixed start with some indices coming off their four months high and trading cautiously ahead of the Fed’s two days policy meeting.

Back home, benchmark equity indices snapped the volatile day of trade on an absolutely flat note on Monday, as investors opted to be on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review and US Federal Reserve meeting. Though, markets made a gap-up opening in the morning with both the frontline indices surpassing their crucial 5,900 (Nifty) and 20,000 (Sensex) levels as sentiments got bolstered after Indian rupee strengthened in early deals to hit four-week high of 62.48 against the dollar at the Interbank Foreign Exchange market on increased capital inflows and dollar selling by exporters. Moreover, supportive cues from US markets too provided support to local markets in first half and the bourses traded in fine-fettle till the August WPI inflation data was announced, which spooked traders’ sentiments dragging benchmarks into red terrain. The data showed inflation based on wholesale price index (WPI) accelerated in August 2013. The August WPI inflation has surprisingly shot back to over 6 percent mark coming at 6.10%, as compared to 5.79% (provisional) for the previous month and 8.01% during the corresponding month of the previous year. In other shock, the June WPI inflation data was revised to 5.16% from the 4.86% provisional. Investors also shrugged off firm cues from European markets which opened higher. Back home, sentiments remained dampened on worries that the disappointing and higher WPI inflation are likely to make the central bank’s job more difficult, as it may have to go against the wishes of the industry and take measures such as raising interest rates to stifle inflation, which could undermine economic growth, already strained and running at a decade low. Selling in software and technology pack too dampened the sentiments as stocks like, Infosys, Wipro, TCS and HCL Technologies edged lower after the rupee gained strength against the dollar. However, some support to the markets came in from buying in public sector oil marketing companies. Stocks of HPCL and BPCL edged higher after they increased petrol prices by Rs 1.63 per litre on rising oil rates and falling rupee. Additionally, stocks related to banking and FMCG counters too remained on the buyers’ radar during the trade. Finally, the BSE Sensex gained by 9.71 points or 0.05% to settle at 19742.47, while the CNX Nifty lost by 10.05 or 0.17%, points to 5,840.55.