Markets to make another cautious start, may see some recovery in latter trade

The Indian markets though managed a good recovery from their initial slump, but still ended lower by over half a percent in last session. Today, the start is likely to be soft-to-cautious tailing the weakness in the global markets. However, markets are likely to see some recovery, as the Paris-based think tank OECD, despite cutting the global growth forecast has said that with “relatively robust” growth prospects, the Indian economy is expected to expand by 7.2 percent this fiscal but difficulty in passing key structural reforms and large non-performing loans are holding it back. Also, Fitch Ratings has said that BJP's defeat in the Bihar assembly elections is unlikely to have any major implications on the economic front. The rating agency said the defeat does not change its view on the medium-term economic outlook for India. Traders will also be getting some support with report that indirect tax collections so far have reached 59.2% of the Rs 6.4-lakh-crore annual target, which is 18.8% higher than what it had collected in 2014-15. Power and banking stocks will continue buzzing, as the Union Power Minister Piyush Goyal has said that the implementation of the revival package of the near bankrupt state-run discoms will result in total savings of nearly $ 30 billion by FY 2018-19.

The US markets declined in last session on worries over the global economic growth and rate hike concern, with the major averages pulling back further off their recent highs. Organisation for Economic Cooperation and Development lowered its forecast for global economic growth. The Asian markets have made mostly a lower start and some of the indices are down by over one percent in early deals, as the prospect of an interest-rate increase from the Federal Reserve underpinned the dollar and weighed on commodity prices. Weak Chinese data too weighed on the sentiments, Chinese data on consumer prices trailed estimates, while producer costs fell for the 44th month.

Back home, Indian equity benchmarks ended the session with a loss of around half a percent on the back of selling by fund and retail investors. Earlier, markets made a huge gap-down opening after BJP's heavy defeat in Bihar state elections raised concerns that his government will struggle to pass policy reforms. Though, there was some recovery after the initial slump but it was not that strong that could lift the markets in green. The recovery was induced with finance minister Arun Jaitley’s statement, who attributing the NDA's defeat in Bihar assembly elections to ‘huge index of opposition unity’, said that it will not impact the economic reforms process. He also said that he hope that Bihar, which is a consuming state, would support the legislation with pending Goods and Services Tax (GST) bill in the parliament. With the heavy buying in the last hours of the session the frontline indices not only surpassed the psychological 7,900 (Nifty) and 26,100 (Sensex) levels but also recovered most of their early losses.  Besides, Prime Minister Narendra Modi has said the 17-month-old NDA government has managed to turn around the image of India as a 'written off' economy to one of the fast developing economies in the world that too supported the sentiments. On the global front, European stocks were flat at opening, while the Asian markets ended mostly in red. Back home, lower-than-expected quarterly earnings by some bluechip companies too dampened the trading sentiment. However, buying in PSU oil marketing companies supported the markets as the minister of state for petroleum and natural gas Dharmendra Pradhan said that government is considering a proposal to remove cooking gas subsidy for those earning above a certain threshold. HPCL and BPCL were trading up by around half a percent.