Markets likely to get a cautious but positive start after five days of decline

The Indian markets extended their declining trend for the fifth straight day in last session as India's wholesale price inflation hit a 14-month high in November and raised hopes of a hawkish stance by the RBI in its policy review. Today, the start is likely to be cautious but positive taking cues from the Asian markets. Though, the traders will now be eyeing the RBI’s decision on policy rates after the inflation numbers. The rate sensitive sectors are likely to remain under pressure, especially the banking sector, as the rating agency Fitch has said that the Indian banking sector, reeling under asset quality pressures, will continue to see difficult times in 2014 due to the weak macro environment. However, India Inc has raised hopes that spurt in inflation to a 14-month high of 7.52 percent in November should not come in the way of the Reserve Bank's formulating an accommodative monetary policy and has said that high interest rates at this stage may only worsen the industrial slowdown without helping ease inflation. The PSU oil marketing companies too will be under pressure as it has been reported that losses on diesel sales have climbed to Rs 10.48 per litre after international oil rates inched up. Advance tax numbers too will keep ticking the markets.

The US markets ended higher amid expectations that Federal Reserve will keep policy loose even after deciding to taper its asset purchases in its upcoming monetary policy scheduled on Dec. 17-18. Though, the domestic economic reports remained mixed but buying interest was generated by some strong economic data from overseas. The Asian markets have mostly made a green start tailing US cues and the Japanese market has taken the lead as yen weakened against dollar.

Back home, Indian equity benchmarks ended the Monday’s trading session slightly in the red, extending southward journey to fifth consecutive day, as investors remained sidelines ahead of Reserve Bank of India’s monetary policy and US Federal Reserve’s meeting outcome later this week for the further direction. Trade remained range-bound with frontline gauges altering between red and green throughout the day. Sentiments remained dampened on report that foreign institutional investors (FIIs) sold shares worth a net Rs 432.02 crore on December 13, 2013. Some cautiousness also crept-in 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. Selling got intensified after India’s main inflation gauge, based on monthly WPI, accelerated to highest level since September 2012 at 7.52% for the month of November as against eight month high figure of 7.00% (Provisional) for the previous month of October and 7.24% during the corresponding month in the previous year, mainly driven by food price inflation which rose at the fastest clip since June 2010. However, the losses remained capped on report that 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. Some support also came in from currency front as Indian rupee, after subdued opening, gained strength and were trading below 62 per dollar mark at the time of equity markets closing. Positive opening in European markets too supported the sentiments to some extent. At home, metal and mining stocks extended their recent losses as latest economic data showed that growth in China’s manufacturing-sector activity slowed to three-month low. Additionally, telecom stocks too edged lower after COAI unveiled monthly addition data. Market leader Bharti Airtel added the maximum 17.22 lakh new users during the month to take its base to 19.65 crore at the end of November and Idea Cellular added 15.4 lakh new users to take its subscriber base to 6.52 crore at the end of the reported month. Finally, the BSE Sensex declined by 56.06 points or 0.27%, to settle at 20659.52, while the CNX Nifty lost 13.70 points or 0.22% to settle at 6,154.70.