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Janet Yellen's Testimony, June Inflation Data and Top Cues to Watch Out Today
Wed, 12 Jul Pre-Open

Share markets in India pared intra-day gains to end flat on Tuesday. Nifty50 breached 9,800 for the first time ever in intra-day backed by surge in technology and automobile stocks.

S&P BSE Sensex ended at new closing high of at 31,747, up 31 points for the day.

The broader markets underperformed the benchmark indices to end in red. S&P BSE Midcap shed 0.8% while S&P BSE Smallcap tumbled 0.6%.

Testimony from Janet Yellen Eyed

Most Asian indexes made gains on Tuesday, with the yen falling to its weakest levels in around four months against the dollar.

Given the data-light trading session on Tuesday, markets are expected to look ahead to cues from central bankers later in the week, with Fed Chair Janet Yellen due to testify before Congress today.

Testimony from Janet Yellen is already looming large as the main policy event of the week. Investors impressions on when the central bank plans to start winding back its US $4.5 trillion balance sheet and on the pace of its rate tightening cycle are likely to have a definitive effect on sentiment.

India will Post June Inflation Data Today

As per an article in the Business Standard, the headline inflation rate is expected to ease below 2%, though the core one is likely to stay around 4%.

Indians have started paying more for items ranging from movie tickets to cholesterol tests, thanks to the new goods and services tax, and that raises the prospect the central bank will grow more cautious about cutting interest rates deeply.

Increases in charges for services, if sustained, threatens to push up core inflation.

Consumer price inflation is predicted to cool to 1.7% in June, easing further from May's 2.18%, according to the poll of more than 30 economists taken over the past week.

If realised, it would be the lowest level since the series began in 2012 and below the Reserve Bank of India's (RBI) medium-term target of 4% for an eighth successive month.

India's policy rates will see a long pause if the inflation moves ahead on the same trajectory and in case monsoon behaves abnormally then even a reversal in rate cycle is a possibility.

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Top Cues to Watch Out Today

Tata Steel UK has signed a definitive sale agreement to sell two of its pipe mills in Hartlepool to Liberty House Group. The sale agreement covers the 42-inch and 84-inch pipe mills, also known as the Submerged Arc Weld (SAW) mills.

Tata Steel will continue to be the largest steelmaker in the UK following the sale of the 42- and 84-inch pipe mills. It will employ almost 8,500 people in the UK, manufacturing advanced products for sectors like automotive and construction.

IDBI Bank announced that the divergence between its own gross bad loan estimates and those made by the Reserve Bank of India (RBI) was Rs 68.16 billion at the end of 2015-16.

The state-owned bank reported gross non-performing assets (NPAs) of Rs 248.75 billion as on 31 March 2016, whereas the stock of gross bad loans stands at Rs 316.92 billion as per the assessment of the central bank.

Steel stocks in action today as the government is likely to impose countervailing duty of 18.95% on imports of certain kind of flat steel products exported from China, with an aim to protect the domestic steel industry against cheap imports.

The Directorate General of Anti-Dumping and Allied Duties (DGAD) which is an investigative arm of the commerce ministry, in its final findings, said that the domestic industry has lost sales opportunities despite sufficient demand in the country and capacities, due to the subsidised imports from China.

The steel makers are chasing imports out by ramping up production. In February, domestic steel output rose by 12.9% YoY, as large private steel producers such as Tata Steel and JSW Steel ramped up output. Imports during the first eleven months of FY17 dropped by 39% YoY.

As per our research analyst Sarvajeet Bodas the bigger concern is weak consumption growth. Here's an excerpt of what he wrote:

  • "The consumption data over the past few months clearly show that there are no takers for domestic steel. So steel makers have been forced to export more, with overseas shipments up by 78% YoY in the fiscal till February.

    We do not think the trend is sustainable. And unless domestic consumption picks up, steel producers may have to take price cuts to utilize their capacities".

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Feb 19, 2018 01:53 PM