Soft opening on the cards as quickening inflation tempers rate cut hopes
14/07/2015 08:37
Dalal Street may ease on Tuesday after posting the biggest single-day gain in three weeks in the prior session as a pickup in consumer inflation cut the room for another interest rate cut by the Reserve Bank of India (RBI) in the near-term, tempering the outlook for Asia’s third biggest economy, curbing risk taking appetite. India’s consumer inflation accelerated to 5.4 per cent in June 2015 from 5.01 per cent in May 2015, faster than the 5.1 per cent gain estimated by analysts, but below the 6 per cent target set by the RBI for January 2016. Traders will eye the wholesale inflation data for June set for release on Tuesday. Analysts expect wholesale prices to have remained under the firm grip of deflation, dropping 2.3 per cent in June 2015, year on year, following a 2.36 per cent annual decline in May 2015. Investors may also resort to some profit booking, at existing levels after a two-day winning streak attributed mainly to easing worries over Europe as Greece reached an agreement with its creditors to secure new rescue aid, eliminating any threat of the debt-strapped nation being pushed out of the euro, an event that financial markets across the globe were dreading. A mixed trend across Asia and subdued trade in the SGX CNX Nifty Index futures for July delivery which fell 0.02 per cent at 8,485 at 10:47 am Singapore time, signals a lackluster opening at Dalal Street on Tuesday. The 30-share Sensex advanced 299.79 points or by 1.08 per cent to close at 27,961.19 on Monday when world markets cheered the Greek debt deal as Europe agreed to bail out the debt ridden Mediterranean nation after Greece agreed to ramp up reforms demanded by creditors, winning new European bailout aid worth 86 billion euro, helping the cash-strapped nation to remain a part of the single currency union. Prime Minister Alexis Tsipras took a u-turn on his stand on austerity measures, submitting to creditors’ demands for streamlining value added taxes, broadening the tax base to boost revenue and limiting pension costs.
Asian shares were trading on a mixed note as focus shifted to the timing of US monetary tightening with traders resorting to a cautious approach ahead of Tuesday’s US retail sales data and the testimony of Fed Chair Janet Yellen tomorrow where she may offer cues over when the world’s top central bank plans to raise interest rates for the first time since 2006. Shares in mainland China retreated for the first time in four days ahead of Wednesday’s GDP numbers which may show that China’s economic growth probably slowed to 6.8 per cent in Q2 from 7 per cent in the March quarter. The gains over the past three days amid aggressive government measures has helped end a rout in China’s equities which eroded almost USD 4 trillion in value. Hang Seng fell but Japan’s Nikkei 225 soared as a weaker yen bolstered the lure for exporter stocks. Overnight, Wall Street marked its biggest three-day rally as traders gave thumbs up to the Greek debt deal.
