Markets to make a cautious start ahead of Brexit referendum

The Indian markets despite recovering from the lows of the day ended marginally in red in the last session. Today, the start is likely to be cautious as all eyes will be on Brexit referendum later in the day. Traders however, will be getting some support with government’s approval of setting up of a ‘Fund of Funds for Startups’ with a corpus of Rs 10,000 crore at SIDBI (Small Industries Development Bank), in line with the Start-up India Action Plan unveiled by it in January. Textile stocks, may again see some spurt as the government announced a Rs 6,000-crore package for the textiles and apparels sector to help it wrest a bigger share of the global market. The aviation stocks too may react to a statement from civil aviation secretary Rajeev Nayan that the government’s intention in raising the FDI limit in scheduled domestic airlines to 100% via the approval route was not to let foreign airlines acquire Indian carriers. The telecom sector stocks will be in action too, with Union Cabinet approving norms for the biggest-ever spectrum auction, which could make exchequer richer by no less than Rs 5.66 lakh crore. According to a cabinet note, the seven bands in which the airwaves are to be auctioned are 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands.

The US markets ended modestly lower in the last session, though selling pressure remained relatively subdued, but traders expressed trepidation ahead of referendum on whether Britain will remain in the European Union. The Asian markets have made a mixed start with some of the indices trading modestly lower, while some are trading higher reflecting confidence that the UK will vote to remain a member of the European Union.

Back home, Indian benchmark indices prolonged the lull for second straight day and finished the session on a dull note, marginally below the neutral line, as investors at large remained reluctant to build on long positions ahead of tomorrow’s crucial referendum that will decide whether Britain will stay in the European Union or not. The session largely remained characterized by choppiness as the aimless indices moved only slowly near the previous closing levels after the early decline. Sentiments remained downbeat with the report that India's fuel consumption grew 6.7% in May over that a year ago, reflecting greater use of cars and increased air traffic in an expanding economy, while crude oil production fell 3.3%, increasing import dependence to 81.9% from 81.3%. Besides, weakness in rupee further dented sentiments. However, market participants get some comfort with an UNCTAD report stating that India's foreign direct investment is likely to cross $ 60 billion this year on favourable policy environment even as the FDI flows globally are set to witness a decline. It has said that the large increase of announced greenfield investments in manufacturing industries may provide further impetus to FDI this year. Moreover, monsoon arrived to drought-hit Vidarbha and Marathwada regions of Maharashtra, and the Bundelkhand region in Uttar Pradesh and Madhya Pradesh as well as other northern states of the country. On the global front, all the Asian equity indices barring Japan's benchmark Nikkei 225 finished the day’s trade in the positive terrain; however European counterparts traded mostly in the positive territory in early deals. Back home, after getting feeble start, the local benchmark indices showed some strength in early trades, but the sentiments turned pessimistic in late morning trades and indices started drifting lower, however the market regained its momentum in the final hour of trade and finished the day with moderate cuts. Finally, the BSE Sensex ended lower by 47.13 points or 0.18% to 26765.65, while the CNX Nifty dropped 16.20 points or 0.20% to 8,203.70.