Markets to start in green ahead of the RBI’s policy announcement

The Indian markets turned cautious in the final hours of the trade in last session and ended lower by about a quarter percent. Today, the start is likely to be in green but there will be cautiousness on the street, as the Reserve Bank of India (RBI) will be announcing its second bi-monthly monetary policy later in the day. While, expectations of a rate cuts are low, traders would focus on the governor’s commentary on the policy stance. Traders will get some support with a private report stating that India jumped 13 positions and was placed second in retail potential in the 2016 Global Retail Development Index (GRDI). It also said that India has become the world’s fastest growing economy. That coupled with a large population base and the easing of FDI regulations in the sector has made it an even more attractive market. There will be some buzz in the PSU banking stocks, as Minister of State for Finance Jayant Sinha has said that the government will examine the capital requirements of various public sector banks (PSBs) for the current fiscal to meet credit growth and NPA provisioning. The pharma stocks are likely to come under pressure with government’s move to cap prices of 56 drugs under its drug price control mechanism.

The US markets ended higher in last session with S&P posting its highest closing in 2016, as the crude inched higher, though Fed Chair Janet Yellen raised hopes the ultra-low interest rate environment will continue through 2016. The Asian markets have made mostly a positive start, with many of the indices extending their gains for the third day after comments by Federal Reserve Chair Janet Yellen quelled speculation US interest rates will be raised in July.

Back home, Indian stock markets prolonged the lull for the second consecutive day and finished the session mildly in red, as market participant adopted cautious approach ahead of the central bank’s decision on policy rates and with a number of global risk events scheduled for later this month, including a US Federal Reserve meeting and the "Brexit" referendum. Further, with crude oil price touching 7-month high of $ 50 a barrel, Finance Minister Arun Jaitley has said India can handle the current level but higher rates will impact the economy and lead to inflationary pressure. India, which depends on imports to meet 80 per cent of its oil needs, will have to spend Rs 9,126 crore more for every dollar per barrel increase in crude oil prices while also see surge in inflation.  However, investors got some encouragement with the report that India has jumped 13 positions from last year to rank second among 30 developing countries this year on ease of doing business. According to 2016 Global Retail Development Index (GRDI), which ranks top 30 developing countries for retail investment worldwide, a pickup in GDP growth and better clarity regarding FDI regulations have helped India achieve a second ranking. Appreciation in the rupee too provided some support to domestic markets. Indian rupee strengthened by 30 paise to 66.95 against the US dollar at the time of equity markets closing on increased selling of the American currency by exporters amid foreign fund inflows. Meanwhile, Telecom stocks took a hit after Reliance Jio started taking registrations from interested people for network trials, indicating that a launch may be around the corner, while sugar companies gained after the private report that stated the profitability trend for domestic sugar mills is likely to be better during the crushing season 2015-16 on supply correction. On the global front, Asian markets ended mostly higher on Monday, while European stocks rose in early trade. Back home, after getting cautious start, the local benchmark indices traded in tight range near neutral line for most part of the session, as investors and traders adopted a cautious approach, ahead of the RBI's bi-monthly monetary policy review on Tuesday. Even through some mild selling was witnessed in late afternoon session; the indices recovered most of their losses by the end of the session. Finally, the BSE Sensex ended lower by 65.58 points or 0.24% to 26777.45, while the CNX Nifty dropped 19.75 points or 0.24% to 8,201.05.