Markets to make a weak start on feeble global cues

The Indian markets completely lost their way from the high points of the day, suffering cut of around half a percent in last session. Today, the start is likely to be weak tailing the feeble global cues. Traders across the world are worried about Britain’s exit from European Union, with some terming it as a biggest crisis for the financial markets since the collapse of Lehman Brothers. On the domestic front, traders will be concerned with weak industrial production data, as the IIP contracted by 0.8 per cent in April, the first decline in three months, led by sluggish manufacturing. Disappointed over the latest Index of Industrial Production data, India Inc has said that industrial revival is going to be a major challenge going ahead but expressed hope that the growth will pick up on account of the recent measures taken by the government. There will be some somberness in the textile stocks on report that textiles exports for the 2015-16 fiscal stood at $40 billion, way short of the $47.5 billion target. The ministry has set an exports target of $48.5 billion for the current fiscal. There will be some buzz in the telecom and IT space too, as the Telecom Regulatory Authority of India (Trai) has put up a consultation paper that seeks to create policies on cloud computing, including lawful interception and whether to license service providers.

The US markets witnessed sharp cuts in last session, a drop in global bond yields weighed on the markets, while there was profit taking amid fear of slowing global growth that added pressure to the markets. The Asian markets have made a firmly negative start and some of the indices in the region are down by over two percent, led by the Japanese market on anxiety over the looming ‘Brexit’ vote and forthcoming decisions from the US and Japanese central banks.

Back home, Indian benchmark indices were unable to recover after plunging in last session after witnessing a volatile day of trade, finally closing in red with around half a percent cut, extending the declining trend for yet another session. Sentiments remained down-beat with the report that monsoon rains in India were 18 per cent below average in the week to June 8, as the onset of rainfall was delayed by nearly a week from its usual arrival on June 1, 2016.  Besides, weakness in the global equities amid decline in crude oil prices also dented sentiments. Incremental pessimism crept in since rupee was trading lower against the US dollar due to higher demand for the American currency from importers and banks. Indian rupee was trading lower by 8 paise at 66.79 against the US dollar at the time of equity markets closing on Friday. Further, Investors remained anxious ahead of Industrial production data slated to be announced later in the day, the IIP for March 2016 was just 0.1 per cent higher as compared to the level in March 2015. However, losses remained capped with report that a group of central and state government officials set up to frame the law for the proposed goods and services tax (GST) has submitted its final draft that could be taken up at a meeting of the empowered committee of state finance ministers next week. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 234.20 crore on June 09, 2016. Meanwhile, sugar stocks witnessed some spurt despite food minister Ram Vilas Paswan stating that India plans to impose a 25% tax on sugar exports to maintain adequate supplies of the sweetener in the local market. Shares of logistics companies extended gains for the fourth straight session on hopes of clearance of the GST Bill in the upper house of the Parliament. Further, Rail stocks gave a mixed reaction to Railway Minister Suresh Prabhu’s announcement that the Indian Railways will invest $140 billion over the next five years in infrastructure and improving the mobility of its services. On the global front, Asian markets ended the final day of week in negative territory, while the European shares slipped for a third straight day to a two-week low. Back home, the key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets immediately after a somber European market opening. Thereafter, the key indices failed to show any kind of resistance due to lack of encouraging leads.