Indian equity benchmarks ended higher on Tuesday as the government data showed that India's retail inflation in August marginally eased to 5.3%, staying within Reserve Bank of India's comfort zone for a second month. Today, markets are likely to open in red on weak global cues. There may be some cautiousness with report that India needs $8 trillion of gross capital formation in greenfield assets to become a $5 trillion economy by FY27. To achieve this, the economy will need at least $400 billion, cumulatively, over six years, in foreign direct investment. However, some respite may come later in the day as traders may get support as India's exports rose by 45.76 per cent to USD 33.28 billion in August, as against USD 22.83 billion in the same month last year, according to commerce ministry data released. There will be some encouragement as private report stated that the surprise fall in August inflation gives the Reserve Bank of India (RBI) room to continue with its accommodation stance longer, and keep a lid on any criticisms about it. The August consumer price index (CPI) inflation print came at 5.3 per cent, lower than the consensus of 5.6 per cent. Meanwhile, the Finance Ministry has permitted 11 states to borrow an additional amount of Rs 15,721 crore after these states achieved the capital expenditure target set for the June quarter. These states are Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan and Uttarakhand. There will be some buzz in Agriculture stocks as the Agriculture Ministry signed five MoUs with CISCO, Ninjacart, Jio Platforms, ITC and NCDEX e-Markets (NeML) to conduct pilot projects for promotion of digital technology and other best practices in the farm sector. Agriculture Minister Narendra Singh Tomar said modernisation of the agriculture sector will continue by infusing new technologies so that farmers can increase their income. There will be some reaction in banking stocks as the gross non-performing assets (GNPAs) of banks are expected to cross Rs 10 lakh crore by March 2022, a ASSOCHAM-Crisil joint study has said. NPAs are expected to rise to 8.5-9 per cent by March 2022, driven by slippages in retail, micro, small and medium enterprise (MSME) accounts, besides some restructured asset.
The US markets ended lower on Tuesday, giving up gains earlier in the session after a better-than-feared inflation reading and falling back into their September doldrums. Asian markets are trading lower in early deals on Wednesday following weakness in US markets.
Back home, in a range-bound session, Indian equity benchmarks closed flat on a positive bias on Tuesday amid gains in Utilities, Consumer Discretionary, Auto and TECK shares. Indices opened a day with good gap, as the government data showed India's retail inflation in August marginally eased to 5.3%, staying within Reserve Bank of India's comfort zone for a second month. Inflation in the food basket was 3.11% in August compared to 3.96% in the preceding month. Some optimism also came as Union finance minister Nirmala Sitharaman has reiterated that the disinvestment plan of the government was on track and the Development Finance Institution (DFI), announced in the Budget, will become operational soon. Additional support also came with India Ratings and Research’s report stated that inflation rates are expected to decline till at least November this year. The retail inflation in August 2021 declined both sequentially and on a year-over-year basis to 5.30 per cent. The strong base effect resulted in the decline in retail inflation. It is the seventh consecutive month of retail inflation remaining in excess of 5 per cent and the 23rd consecutive month of retail inflation remaining in excess of RBI's targeted inflation rate of 4 per cent. But, key indices cut most of their gains in late afternoon session after data showing that the wholesale price-based inflation rose marginally to 11.39% in August, mainly due to higher prices of manufactured goods, even as prices of food articles softened. In July 2021, WPI inflation stood at 11.16%. However, key indices managed to end session in green, taking support from Commerce and Industry Minister Piyush Goyal’s statement that India and the UK are moving towards an early harvest trade agreement, with a comprehensive free trade agreement (FTA) the next step. The UK’s Department for International Trade (DIT) said the talks between the two ministers focussed on the ‘scope and ambition’ for a UK-India free trade agreement (FTA), following the close of the UK’s formal consultation process ahead of the negotiations on August 31. Finally, the BSE Sensex rose 69.33 points or 0.12% to 58,247.09 and the CNX Nifty was up by 24.70 points or 0.14% to 17,380.00.
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