Markets likely to make a flat start; inflation data eyed

The Indian markets closed higher in last session after a very choppy day of trade, last hour recovery helped the indices snap the day with gain of around half a percent. Today, the start is likely to be in green supported by the positive regional cues; however the trade may remain cautious ahead of the WPI inflation data, to be announced later in the day. Headline wholesale price index inflation is expected to have edged higher in July from 7.25 per cent in June. Reserve Bank of India (RBI) Governor Duvvuri Subbarao stuck to a hawkish tone expressing his concern that inflation remains very high and again urged the government to restrain its own borrowing, hence besides inflation data, market would also watch for the steps that are likely to be announced by the government to contain the fiscal deficit. Rain worries too are likely to weigh on the sentiments; Subbarao too has said that deficiency of rainfall is a cause for worry as it might put pressure on some commodities. Meanwhile, there is encouraging news for the retail sector, the commerce ministry has said that India has received six proposals from global single-brand retailers seeking permission to own 51 per cent of their operations in the country.

There will be lots of result announcements too, to keep the markets buzzing. ABG Shipyard, Adhunik Metal, Aegis Logistics, Amara Raja, Austral Coke, Core Projects, Electrosteel Castings, Fortis Healthcare, Gammon India, HDIL, Hindalco Inds, Hindustan Copper, IDFC etc are among the many to announce their numbers today.

The US markets got a halt to their six days gaining streak and ended mostly lower on Monday due to mild profit booking in late hours, after data showed Japanese economy grew much less than expected. Most of the Asian markets have made a green start, though the Japanese economic growth numbers were disappointing but Bank of Japan minutes showed policy makers weren’t ruling out any options to boost the economy.

Back home, after squandering for most part of the session around the previous closing levels, the domestic benchmark equity indices staged a smart comeback in the last leg of trade and snapped Monday’s session near day’s high with over half a percent gains. Though, the benchmarks traded near its pre-close level till mid noon session as the undertone stood cautious due to mixed global cues and owing to persistent concern about the state of the deteriorating fundamentals of Indian economy. Moreover, traders remained on the safer side awaiting July inflation data to be announced tomorrow and the pace of economic growth amid majority of Indian Inc pegging growth in the range of 6-6.5 percent for 2012-13. The frontline indices smartly bounced back in the last session and across the board hefty position build up, helped the gauges to outperform all their Asian as well as European counterparts. Moreover, the relentless buying by foreign funds in local equities too supported the sentiments as they pumped nearly Rs 4,800 crore into stock markets in the month of August so far. Meanwhile, the report that Department of Industrial Policy and Promotion (DIPP) is likely to ease stringent retail foreign direct investment norms in single-brand retail also supported the market sentiments and stocks like Shoppers Stop, Pantaloon Retail, Provogue India, Brandhouse Retails, Archies and SRS all edged higher in the trade. However, the overall gains of the market remained capped as there is threat of India getting a downgrade to its sovereign rating; Fitch Ratings has said that possibility of downgrading the country’s sovereign rating is more than 50 percent in the next 12-24 months. Finally, the BSE Sensex gained 75.71 points or 0.43% to settle at 17,633.45, while the S&P CNX Nifty rose by 27.50 points or 0.52% to close at 5,347.90.