Markets to extend the weakness with a soft start

The Indian markets lost considerably in the last session, extending their declining streak amid weak global cues and ahead of this week's Fed and BOJ meetings and the upcoming Brexit referendum later this month. Today, the start is likely to remain sluggish on weak global cues, traders will also be reacting negatively to the report of rise in retail inflation, which accelerated to a near two-year high of 5.76 percent in May, dampening hopes of a rate cut by the RBI. Now traders will be eyeing the wholesale price index inflation data slated to be announced later in the day. However, some stabilization can be expected in the latter part of the trade and traders will be getting some support with Minister of State for Finance Jayant Sinha’s statement that the government has enough backing from smaller regional parties to pass the Bill in Rajya Sabha without support from the main opposition Congress party and if we can pass it in the monsoon session of Parliament, then we can implement it in April 1, 2017. There will be some buzz in the banking and realty companies, as the Reserve Bank of India has thrown a lifeline for overleveraged companies and banks to put an end to future bad loans by permitting capital restructuring which would see banks taking equity in companies. Power sector stocks too will be in action on a key energy report stating that weak coal and gas prices will not stop record investment in renewables over the coming decades as the cost of generating clean energy drops.

The US markets once again ended in red in the last session, with the S&P 500 further pulling back off its ten-month closing high, as traders reacted to the mass shooting in a nightclub in Orlando over the weekend and traders kept looking ahead to the Federal Reserve's monetary policy announcement on Wednesday. The Asian markets have continued their downtrend with most of the indices trading lower. Risk aversion was prevailing in the markets on mounting concern over the UK’s vote on European Union membership after new polls indicated more Britons favor leaving the EU than want to remain. Japanese market was once again leading the decliners as the yen strengthened against all its peers.

Back home, Indian benchmarks started the new week on a disappointing note, as sharp decline in the rupee, slide in crude oil prices and weakness among global peers led to sell off across the board by investors. Sentiments remained dismal as worries over global economic growth prospects prompted marketmen to take profits off the table after official data released earlier on Monday showed China's fixed-asset investment growth eased to 9.6 percent on-year in the January-May period, below market expectations, while the statistics bureau said downward pressures still exist in the economy. Sentiments were undermined by the industrial output, which contracted by 0.8 per cent in April, the first decline in three months, due to drastic fall in capital goods production and manufacturing activities. 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. Meanwhile, some traders remained on the sidelines and refrained from any buying activity ahead of key macroeconomic data i.e. consumer price index (CPI) to be released later in the day and inflation based on the wholesale price index (WPI) for May to be released on Tuesday. Caution also prevailed ahead of the key central bank meetings this week in the United States, the UK, Switzerland and Japan. All are expected to hold monetary policy steady against a backdrop of caution heightened by the global impact from a possible Brexit. Earlier on Dalal Street, the benchmark got off to a gap down opening, in tandem with the somber sentiments prevailing in Asian markets amid jitters over the forthcoming referendum on whether the UK would remain in the European Union scheduled on June 23, 2016. The selling pressure accentuated in the early afternoon as investors took to across the board risk aversion immediately after a somber European market opening. Finally, the BSE Sensex ended lower by 238.98 points or 0.90% to 26396.77, while the CNX Nifty dropped 59.45 points or 0.73% to 8,110.60.