Markets to continue their somber run with a cautious start of new week

The Indian markets continued their slump in last session on getting disappointing economic report of rise in CPI inflation and decline in IIP. Today, the start of the crucial week is likely to remain cautious and traders will be eyeing the moves of both RBI and US Federal Reserve's meeting out come later this week for the further direction. Traders will watch the WPI inflation numbers to be announced later in the day, as it will have a major bearing on RBI policy meet on December 18 after the CPI surged to a nine-month high of 11.24 percent in November. There will be some cautiousness among the traders as the foreign direct investment (FDI) inflows into the services sector declined by about 62 percent year-on-year to $1.36 billion during April-October of the ongoing fiscal. However, the government has put on the fast track projects worth Rs 34,647 crore in petroleum and natural gas and power sectors by approving a number of them and giving directions for urgent clearances to the rest. Investors would also keep an eye on the ongoing stormy winter session of Parliament that is underway, while there will be lots of stock specific movements based on the advance tax payments of different companies for the final quarter.

The US markets though managed a flat closing in last session but the traders remained concerned about the Fed’s probable tapering announcement in its upcoming policy meeting, there was some profit booking too that kept the markets in check. The Asian markets have mostly made a soft start ahead of a two-day Federal Reserve meeting starting tomorrow. Japanese market too was trading lower despite its quarterly Tankan index for large manufacturers rising to 16 from 12 in September.

Back home, Friday turned out to be a daunting session of trade for the Indian stock markets, which extended the southbound journey for fourth consecutive day and ended with loss of over a percentage point as investors reacted negatively to the double whammy of contraction in IIP and surge in Consumer Price Index. India’s annual industrial output growth, measured by index of industrial production (IIP), contracted 1.8% at 168.5 in the month of October over the corresponding month of previous year. Moreover, CPI (Combined) for November 2013 on point to point basis surged to nine months high level at 11.24%. After a negative opening, the domestic bourses never looked in recovery mood and continued sliding till end as some pessimism came in from Reserve Bank of India’s (RBI) Governor Raghuram Rajan’s statement that inflation was higher than the central bank’s comfort zone, while growth was weaker than estimated and vowed to calibrate policy carefully. Selling was both brutal and wide based as, barring software, none of sectoral indices on BSE were spared. Global cues, on the contrary were positive, both Asian and European shares accumulated gains despite concern of Fed scaling back its stimulus program in the near future after a report showed slightly stronger than expected retail sales growth in the month of November. Back home, sentiments also remained down-beat after Indian rupee fell and bonds yields surged on Friday after retail inflation spiked. On the currency front the rupee was at 62.20 per dollar at the time of equity markets closing as against previous close of 61.83 per dollar. Selling in banking stocks too dampened the sentiments as investors lightened their bets in this space ahead of RBI’s monetary policy in the coming week, precisely on December 18. Additionally, fertilizer stocks that witnessed some buying in the intra-day trade after Cabinet Committee on Economic Affairs (CCEA) approved an Rs 4,800 crore subsidy for the sector, too edged lower by the end of the trade. Finally, the BSE Sensex declined by 210.03 points or 1.00%, to settle at 20715.58, while the CNX Nifty plunged by 68.65 points or 1.10% to settle at 6,168.40.