Up the pyramid, slowly…

"There is no sudden leap into the stratosphere... There is only advancing step by step, slowly and tortuously, up the pyramid towards your goals..." There is more action on the streets as the playful side of Lord Krishna is celebrated on Janmashtami. Youngsters will form human pyramids to reach a high-hanging pot of butter and break it. For the government and policymakers they have many high-hanging pots to reach. IIP contracted by ~2% in June – increasing the headache for policymakers, who have been grappling with a slowing economy, sticky inflation, high borrowing costs, widening twin deficits and a global mess. But, the people in charge of monetary and fiscal policies are at loggerheads when it comes to taking action to revive growth. While the RBI blames loose fiscal policy for its reluctance to cut rates, the Government is banking on the central bank to blink first. The tug-of-war is not over yet and one doesn’t really know as to how it will end. Meanwhile, the accuracy and credibility of the IIP has been in doubt for quite a while now. So, one need not make too much of hue and cry about dismal IIP numbers. All eyes will be on Q1 GDP data due out on Aug. 31. A number of independent research firms have slashed their FY13 GDP forecasts.There is a fear that rating agency S&P could downgrade India's credit ratings given the lack of progress on pending reforms, poor monsoon and decelerating growth momentum. The start today looks to be a muted one. We may have entered a consolidation phase for the time being after the recent spike. Key Indian stock indices could remain rangebound as investors await decisive remedial measures from the Centre. Globally too, things have turned quiet in the last couple of sessions, as investors take a breather following a world-wide rally in risky assets. Trading volumes have ebbed, both, in the US and European markets of late. Indices in the US are trading near three-month highs while their European counterparts are hovering around four-month peaks. Asian markets are mostly lower this morning as the mix of economic data and potential policy intervention remains inconclusive for now. Meanwhile, the Reserve Bank of Australia (RBA) has raised its 2012 GDP growth forecast on stronger-than-expected consumer demand, while saying that a strong local currency could continue to weigh on the economy. The so-called Aussie is trading near a four-month high vs. the US dollar. The euro was set for the first weekly drop in three weeks before the release of eurozone GDP data later today. GDP in the euro area is likely to have contracted 0.2% in the three months through June after being unchanged in the first quarter, according to consensus estimate. Investors should be wary of a steepening yield curve in the US Treasury market, according to Pacific Investment Management Co.’s (PIMCO) Mohamed El-Erian. While yields on government securities due in eight years and less are anchored by Federal Reserve monetary policy, bond buyers should be wary of longer-maturity debt, El-Erian, the CEO of the world’s largest bond fund manager, was quoted as saying. Key Results Today: Apollo Hospitals Enterprise, Bharat Forge, BPCL, Gammon Infra, Hathway Cable Datacom, India Infoline, Pentamedia Graphics, PVP Ventures, SBI, Shipping Corporation of India, Siemens, SREI Infrastructure Finance, Sun Pharma, Sundram Fasteners, Trigyn Technologies, UCAL Fuel Systems. Trend in FII flows: The FIIs were net buyers of Rs.3.37bn in the cash segment on Thursday while the domestic institutional investors (DIIs) were net sellers of Rs.7.54bn, as per the provisional figures released by the NSE. The FIIs were net sellers of Rs 2.4bn in the F&O segment on Thursday, according to the provisional NSE data. The foreign funds were net buyers of Rs 11.38bn in the cash segment on Wednesday, according to the SEBI figures. Global Data Watch today: China Trade Balance (Jul), China Imports and Exports (Jun), Australia RBA Monetary Policy Statement, Japan Industrial Production (Jun), Japan Capacity Utilization (Jun), Germany Consumer Price Index (Jul), France Budget (Jun), France Industrial Output (Jun), Italy Consumer Price Index (Jul), UK Producer Price Index (Jul), Portugal CPI, US Import Price Index (Jul) and US Monthly Budget Statement (Jul).