All Eyes On CPI And IIP Numbers

As expected the Indian equity markets continued to witness profit booking which resulted in third consecutive trading session of negative closing. Markets extended losses for the third straight day led by a sell-off in Sun Pharma shares while selling by foreign funds also weighed on market sentiment. The30-hare Sensex ended down 62 points at 26996 and the 50-share Nifty ended down 8 points at 8086.

However noticeable factor was the broader indices outperformed the benchmark indices. The Mid Cap and Small Cap indices witnessed an up move of more than 1%. We have been categorically stating our readers that the Mid Cap and Small Cap stocks are going to outperform in near term. Rather the stocks from Mid Cap basket have been our prime recommendations. As we move ahead, we feel the Mid Cap and Small indices are likely to continue their relative out-performance in near to midterm.

As for the Indian equities there are few factors that are expected to drive the markets. First and the foremost is the announcement of CPI and IIP numbers today. We feel markets are likely to remain muted in the morning trade till the numbers are announced. As regards CPI estimates, most on the street are expecting it in the range of 7.70-7.80% against the 7.96 % posted in the preceding month. Here we feel the lower base effect from 2013 is likely to come to rescue the markets. If investors could recollect the CPI numbers remained stick in same period preceding year. In case of IIP figures, the IIP numbers are likely to witness traction as manufacturing activity improved significantly.

On global front, the Standard & Poor’s 500 Index erased losses, sending the gauge higher for a second day, as a rebound in oil offset concerns over escalating geopolitical tension and the timing of possible interest-rate increases. The S&P 500 added 0.1 % to 1997.39, after an earlier decline of as much as 0.5 %. The Dow Jones Industrial Average lost 20.13 points, or 0.1 %, to close at 17048.58. Experts suggested that markets have just stuck in a tight range because the market has been so strong this year and every now and then the market needs a little time to cool off.

Apart from this reports suggested that, Equities slid earlier as European Union officials said new sanctions against Russia will come into force tomorrow because of the country’s continued support of separatists in Ukraine. Ending days of wrangling, EU countries agreed to implement plans to bar some Russian state-owned defense and energy companies from raising capital in the bloc. President Barack Obama said the U.S. is joining the EU in slapping more sanctions on Russia.

Taking the cues from US markets, the Asian indices are also providing mixed signals. While Nikkei is trading in green with gains of 0.34%, Hang Seng is in red with loss of 86 points or 0.35%. Shanghai Markets have also opened on weak note with decline of 0.10%. We feel the increase in Oil prices is also one of the factors apart from expected early rate hike by US Fed in the next FOMC meet scheduled on 17th September.

As for Indian equities, SGX Nifty is trading weak with loss of 13 points or 0.16%. We expect the markets to open on a flattish note ahead of the key announcement of CPI and IIP data. One can see some amount of profit booking in the early trades. However if the IIP and CPI number come better than the street estimates, some recovery is likely to occur. However if the inflation remains sticky, the markets may slide further.