With each passing day the woes of Indian steel market and industry seem to be escalating. The NIFTY and BSE plummeting by another 6 and 34 points the mood was sombre.

On 14th inflation figures for August will be declared followed by RBI financial review on 16th. The market awaits with baited breath the outcome of RBI strategy. It is forgone that the inflationary numbers would be uncomfortably high in August as well regardless of its trend. However the RBI verdict about interest rates is critical for the market.

Industry experts have been crying hoarse about the preposterously high cost of capital hitting their bottom lines as well as the buyer behaviour. It is unlikely that these pleas will have reversal effect on RBI but the certainly it will put the Governor in double mind before announcing any hike. A hike of 25 basis points instead of 50 would to some extent soothe the market if not kindle. However it is widely believed that this might be last dosage of interest hike before the culmination of FY’11-12.

July industrial production figure at 3.3% is indicative that the patience of the industry is withering away and the government was quick to send reconciliatory insinuations with the possibility of a bailout package to be announced on 28th September after the Finance Minister meets the captains of the industry.

The package is likely to be in the form of tax sops and extension of exemption period. In the short term the market will certainly react with excitement but it will fizzle away if it is not followed by affirmative action by government. Major growth catalysing decision viz., announcement on infrastructural projects coupled with liquidity, FDI in retail sector, availability of products and normal monsoon easing the inflation would be critical. With the peak demand season on the anvil in Q3 the sops in terms of tax exemption and reduction in lending rate as fallout of regulated inflation will certainly augur well for the economy.

The "lengthening shadow" of the debt crisis in Europe is a cause for concern. Growing fears of a potential Greek debt default ripping into Europe's banking sector have rattled world markets and add to the domestic concerns.

Movements in the domestic and global dynamics would be closely linked to the economic and market direction in the next 2 Quarters

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