Markets likely to remain cautious with a flat start

The Indian markets turned choppy in last session and lost all their early gains to end lower by over half a percent on earnings concern. Today, the start is likely to be cautious though some recovery can be expected in latter part of the trade. Foreign traders are likely to remain watchful despite minister of state for finance Jayant Sinha's efforts to clear doubts on the Minimum Alternate Tax (MAT) on foreign funds. Investors are worried, even though the minister stated that funds invested through Mauritius and Singapore -countries with which India has treaty for tax exemption on capital gains-will be untouched. Meanwhile, global rating agency Moody’s too has said that a growth rate of more than 7.5 percent may not be “sustainable” for India in the present scenario and the country needs to resolve tax issues that are impacting its investment climate. There will be some buzz in the banking stocks, with Reserve Bank of India revising the priority sector lending norms. New sectors like renewable energy and social infrastructure will get a boost as these are now classified as priority sector. Fertilizer stocks too will see some action, as Fertiliser Minister Ananth Kumar has said that the country will add 10 million tonnes (MT) in fertiliser production capacity at an estimated investment of Rs 60,000 crore.

The US markets extended their gains in last session with modest gains, reacting positively to latest batch of earnings news from big-name companies. Although, the housing stocks moved lower on the disappointing new home sales data and there was an unexpected uptick in initial jobless claims, but traders turned hopeful that the Federal Reserve will delay its planned increase in interest rates due to weak economic data. The Asian markets have made mostly a positive start heading for fourth weekly gains, though some weakness was being witnessed in Chinese and Japanese market on some profit taking and as the yen held gains amid weak US economic data.

Back home, resuming their southward journey, Indian equity benchmarks ended the Thursday’s trade with a cut of over half a percent. After a positive start, markets entered into red terrain and traded choppy throughout the session as sentiment remained cautious. Corporate earnings continued to miss estimates, while a forecast for poor rains ahead of the June-to-September monsoon season raised concerns of drought. Though, key gauges attempted recovery in late trade but it proved short-lived and markets ended the session below their crucial 27,750 (Sensex) and 8,400 (Nifty) levels. Sentiments remained dampened on report that foreign institutional investors sold Indian shares worth Rs 910 crore ($144.08 million) on Wednesday, provisional exchange data showed. Investors failed to draw any sense of relief with Finance Minister Arun Jaitley’s statement that the government will move the GST Constitution Amendment Bill in Parliament within a couple of days. Traders also shrugged off the industry body CII’s statement that the Land Bill introduced in Parliament will create millions of jobs, meet the aspirations of farmers, and help spur growth in the economy. Meanwhile, rating agency Moody’s said emerging economies in the Asia-Pacific region, including India, have a high degree of immunity to external shocks, but will face challenges when the US Federal Reserve begins raising interest rates. Weak opening in European markets too dampened the sentiments, However, Asian markets ended mostly in the green. Back home, depreciation in Indian rupee too dampened the sentiments. Select IT shares remained under pressure for the seventh straight session over concerns about quarterly earnings. On the flip side, metal stocks remained on buyers’ radar amid bets that Chinese policymakers will act to shore up growth in the world’s second-largest economy. Finally, the BSE Sensex declined by 155.11 points or 0.56% to 27,735.02, while the CNX Nifty lost 31.40 points or 0.37% to 8398.30.