Markets to make a soft start tailing weak global cues

The Indian markets completely lost the momentum in second half of the last session and suffered cuts of over half a percent. Today, the start is likely to remain soft on sluggish global cues. Though, there will be some support with a private poll stating that India's economy will hum along at a solid pace for the remainder of this fiscal year provided structural reforms are passed, while above-target inflation means the Reserve Bank of India will only cut rates once more this year. Meanwhile, Finance Minister Arun Jaitley has said that India has underlined the need for a judicious mix of fiscal, monetary and structural policies by major economies to deal with the heightened uncertainty on account of Brexit. He said that governments, Central Banks and regulators have to mitigate the pressure of such vulnerabilities through judicious mix of fiscal, monetary and structural policies. The infra sector stocks will be in action, with the CII infra panel urging the government to speed up the recommendations of Kelkar committee report based on interactions with private sector developers, bankers, regulators, private equity funds. There will be lots of earnings announcements, while the whole FMCG pack is likely to remain under pressure after ITC came up with a below estimate earnings in June quarter.

The US markets ended modestly lower in last session and the Dow snapped a nine-session streak of gains, mainly on weak set of earnings led by tech stalwart Intel and from transportation companies. Traders also reacted to the European Central Bank's first monetary policy decision since Britain's vote to leave the European Union, where it left interest rates unchanged. The Asian markets have made a weak start and some of the indices are down by over half a percent, tailing the decline in US markets overnight, as prospects for central bank stimulus in Japan cooled after ECBs decision.

Back home, Indian stock indices showed a disappointing performance on Thursday’s trading session after a resilient show in previous trade. Sentiments remained under pressure with the Moody's Investors Service’s report indicating the growth in debt levels over the decade-mainly driven by private debts, making emerging market economies vulnerable to external shocks. According to Moody's report, the average external debt to gross domestic product ratio for Asia as a whole has increased from 31 per cent in 2008 to 47 per cent in 2015. The largest surge was reported in external borrowings in China, India, Indonesia, Taiwan and Malaysia.  Further, market participants turned jittery with the Finance Minister Arun Jaitley’s statement that India has underlined the need for a judicious mix of fiscal, monetary and structural policies by major economies to deal with the heightened uncertainty on account of Brexit. Weak trend in European stocks coupled with depreciation in rupee value against the US dollar also weighed on the sentiment. However, investors got some comfort with the private report indicating Inflation in India to fall to 4.5 per cent by next March, giving the Reserve Bank of India (RBI) space to cut key policy rates by 50 basis points in the current fiscal. Some support also came after international credit rating agency Standard & Poor's (S&P) striking a buoyant note, penciling in an 8 percent growth for India in the next two years. According to S&P, the view is predicated on the steady, ongoing structural reform push, including GST passage, a good monsoon season this year, and a wise choice to head the Reserve Bank. On the global front, Asian markets ended mostly higher on Thursday, however, Europe edged lower in early trade. Back home, after getting a fragile start, Indian benchmark indices traded near neutral line through the morning trade, but sentiments turned pessimistic in noon post weak opening of European markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads.  The selling pressure accentuated in the late afternoon trades as investors took to across the board risk aversion. Finally, the BSE Sensex ended lower by 205.37 points or 0.74% to 27710.52, while the CNX Nifty dropped 55.75 points or 0.65% to 8,510.10.