CPI, Chinese Stimulus Plans Push Markets Up

The Indian markets have moved towards trading on the ceiling of the range it was trading between. The Sensex is currently trading 105.30 points higher at 17796.38, up by 0.60%, while the Nifty is trading 29.90 points higher at 5396.20, up by 0.56%. This positivity has been sustained and moved a little higher because of the release of the Consumer Price Index (CPI) data for inflation. The data indicates that the CPI has eased from the June figure of 10.02 to 9.86 in July. The figure dipping below the 10% mark has provided some relief to investors. This data has come in right after the unexpectedly eased WPI data.

The trends in Asian markets remained the same as before with the Nikkei and Hang Seng closing in the red and the Shanghai Composite higher by 0.54% due to the increased activity in reverse repurchasing taken by China to ease the liquidity issue. Chinese markets, on Friday had seen heavy selling due to concerns over the Chinese government holding plans of easing monetary policy due to rising real estate prices in several provinces in China. The rise was also backed by reports of the government planning fresh economic stimulus for the second half of the year to boost domestic consumption and encourage credit. With HSBC weighing on the Hang Seng, Hong Kong slipped 0.24%.

European markets opened significantly positive today due to the reported stimulus plans in China to boost the economy. This news has heavily contributed to increasing investor confidence. European markets were largely supported by buying seen in the banking and mining sectors in Europe. This resulted in the FTSE, DAX and CAC rising by 0.42%, 0.28% and 0.61% respectively.

On the domestic front, midcaps still remains flat, with growth coming in from the Sensex and the smallcap index. Among sectors, IT and Teck are trading higher by 1.63% and 1.30% respectively. While Infosys and Tata Motors continue to rise by more than 2%, Hindalco and Tata Steel have been trading considerably lower in the range of 0.51%-2.72%. All sectors other than Bankex have been trading positive.

We expect the positive trend of the market to continue with the backing of the eased CPI, though not in the comfortable zone yet, and due to reports on China’s fresh measures to boost the economy acting on global markets.