Markets to make a weak start reacting to disappointing macro data

The Indian markets bouncing back from the previous session’s plunge, posted gains of over half a percent in last session. Today, the start is likely to be soft on weak global cues and traders will also be reacting negatively to the macro data announced late last evening. In a double blow India's industrial production growth slowed to 0.1 percent in March, as compared to 2.5 percent during same month last year, while retail inflation inched up in April to 5.39 percent, compared to 4.83 per cent in March. There will be buzz in the corporate world with RBI proposing tighter norms to mitigate the risk posed to the banking system on account of large aggregate lending to a single borrower. 2017-18 onwards and the banking system should ordinarily keep its future incremental exposure to specified borrowers within the normally-permitted lending limit. In other development India's market regulator is said to be considering more stringent rules for participatory notes as part of efforts to check the flow of black money into stock markets. There will be lots of scrip specific movement with the MSCI rejiging its India index and adding Bajaj Finance, Havells India, Titan Company and Yes Bank to the list, while removing Reliance Communications, REC, and United Breweries. Also there will lots of result announcements to keep the markets in action.

The US markets ended lower along with the crude oil, extending the steep drop seen in the previous session. Traders also remained concerned about the Labor Department report showing an unexpected increase in initial jobless claims. The Asian markets have made mostly a lower start, with some indices leading to their third weekly loss. The Chinese market though was trading higher ahead of the release of details of new loans.

Back home, a session after displaying a disappointing performance, Indian benchmark indices bounced back on Thursday, as participants opted to buy beaten down but fundamentally strong stocks. Sentiments got a boost with UN report that India is expected to achieve a 7.5 per cent GDP growth in 2017 and the economic prospects of the South Asian region will be contingent on the growth trajectory of India and Iran. According to report, investment demand in India is supported by the monetary easing cycle, rising FDI, and government efforts towards infrastructure investments and public-private partnerships. Furthermore, prospects of a good monsoon improved as the crucial weather system is likely to hit the Kerala coast on the normal date of June 1, while the risk of a lingering El Nino, which disrupts rainfall in the region, has been eliminated by favourable changes in ocean temperatures. This is good news for farmers and policy makers, as vast areas of the country suffered a drought for two years, which has hit farm output and dried up crucial reservoirs, because El Nino continued to haunt South Asian weather since last year. However, Investors remained cautious ahead of Industrial Production (IIP) for March and Consumer Price Index (CPI) data for April due to be released later in the day. On the global front, Asian markets ended mostly in red on Thursday, while the European stocks rose with US equity-index futures. Back home, after getting a gap up start, the local benchmark indices showed some strength in early trades, but the sentiments turned pessimistic in late morning trades and indices start drifting lower, however the markets regained its momentum in the late afternoon trade and surged over half a percent by the end of session. Finally, the BSE Sensex surged 193.20 points or 0.75% to 25790.22, while the CNX Nifty rose 51.55 points or 0.66% to 7,900.40.