Extending their gains for the second trading session, Indian equity benchmarks ended higher on Monday in line with firm trend in global markets on the back of rising expectations of a rate hike pause by the US Federal Reserve. Markets made a positive start, as traders got encouragement after Reserve Bank governor Shaktikanta Das said the central bank expects retail inflation to start declining from this month.  Some support also came as data with the Securities and Exchange Board of India (SEBI) showed that investment in the Indian capital markets through participatory notes rose to close to a six-year high at Rs 1.23 lakh crore in July-end, making it the fifth consecutive monthly increase, on the back of stable macroeconomic fundamentals. The amount has reached the highest level since December 2017 -- when investment through the route stood at Rs 1.25 lakh crore. However, markets trimmed most of their opening gains to trade flat in late morning deals as some cautiousness prevailed in the markets after latest data by the Reserve Bank of India (RBI) showed India's foreign exchange reserves are down by $30 million at $594.85 billion for the week ending August 25. But, key gauges regained traction in afternoon deals, taking support from Economic Affairs Secretary Ajay Seth's statement that the government is confident of meeting the fiscal deficit target of 5.9 per cent of gross domestic product (GDP) and the nominal GDP target of 10.5 per cent despite pressure in the initial months of FY24. Fresh foreign fund inflows also added to the optimistic trend in the domestic equity market. Foreign Institutional Investors (FIIs) were buyers on Friday as they bought equities worth Rs 487.94 crore, according to exchange data. Finally, the BSE Sensex rose 240.98 points or 0.37% to 65,628.14 and the CNX Nifty was up by 93.50 points or 0.48% to 19,528.80.

The US markets were closed on Monday in observance of the Labor Day holiday.

The Indian rupee ended weaker against the US dollar on Monday weighed down by a surge in crude oil prices and strength of the American currency in the overseas market. Traders were worried after latest data by the Reserve Bank of India (RBI) showed India's foreign exchange reserves are down by $30 million at $594.85 billion for the week ending August 25. On the global front, the dollar edged lower on Monday, with U.S. markets closed for a holiday, as investors weighed U.S. jobs data that showed some signs of cooling, boosting bets the Federal Reserve could be at the end of its monetary tightening cycle. Finally, the rupee ended at 82.71 (Provisional), weaker by 9 paise from its previous close of 82.62 on Friday.

The FIIs as per Monday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 16778.52 crore against gross selling of Rs 15000.52 crore, while in the debt segment, the gross purchase was of Rs 903.89 crore with gross sales of Rs 187.61 crore. Besides, in the hybrid segment, the gross buying was of Rs 80.61 crore against gross selling of Rs 36.29 crore.

The US markets were closed on Monday on account of labour day holiday. Asian markets are trading in red on Tuesday ahead of Australia's central bank's rate decision. Indian markets extended gains for the second straight session on Monday led by sustained buying support from IT and Metal stocks. Today, markets are likely to get cautious start amid lack of directional cues. Investors will be eyeing services PMI data to be out later in the day. Foreign fund outflows likely to dent sentiments. According to the provisional data available on the NSE, foreign institutional investors (FII) sold shares worth net Rs 3,367.67 crore on September 4. However, some support may come with report that rains forecast for swathes of India this month should limit the damage to crops after a delayed monsoon and parched August, leaving the world's most populous nation with sufficient supplies. Besides, a GST advance ruling authority has ruled businesses can claim input tax credit on items, like gold coins and white goods, procured for distribution to dealers upon achieving pre-specified sales targets as part of promotional schemes. The Karnataka-bench of the AAR (Authority for Advance Ruling) ruled that ITC can be availed on taxes paid for procurement of white goods or gold coins for the purpose of incentive to dealer as it is a supply. Meanwhile, the Finance Ministry has initiated the process to prepare the interim Budget for 2024-25 by inviting inputs on expenditure from different ministries and departments. It will be an interim Budget as the elections for the Lok Sabha are due early next year. Sugar stocks will be in focus with a private report that retail and factory level sugar prices have been rallying by about 3% in last one month on persistent monsoon deficit in key sugarcane producing states. Retail sugar prices have been ruling between Rs 40 and Rs 45/kg across the country. There will be some reaction in e-commerce sector stocks as the commerce ministry's arm DGFT said it has suggested banking and financial institutions to extend pre- and post-shipment export credit in foreign currency to e-commerce exporters based on the guidelines of the RBI. Any issues in availing such credit may be brought to attention by e-commerce exporters or banks to the directorate general of foreign trade (DGFT). Autos stocks will be in limelight as credit rating agency ICRA projected that the Indian commercial vehicle (CV) industry could face a potential price hike of 10-12 per cent due to the implementation of multiple proposed regulatory changes. Moreover, Vishnu Prakash R Punglia will debut on the bourses today and the issue price is Rs 99.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Adani Ports and Special Economic Zone has recorded bumper cargo volumes of 34.2 MMT in August 2023 on the back of solid growth in containers and liquids & gas cargo types. 
• ITC is planning to invest around Rs 1,500 crore to set up an integrated food manufacturing and logistics facility and a sustainable packaging products manufacturing facility at Sehore in Madhya Pradesh.
•  NTPC has signed a MoU with Oil India to explore collaboration in the areas of Renewable Energy, Green Hydrogen & its derivatives, Geothermal and other Decarbonization initiatives. 
• Bharti Airtel is planning to purchase 23,000 MWh of renewable energy by Q4 FY 2023-24 for its data center company, Nxtra.