Markets to make a flat-to-positive start reacting to RBI’s action

The Indian markets suffered sharp cuts in last session, losing their momentum in final hours to end the August series on a lower note. Today, the start of the new series is likely to be flat-to-green, strong rollovers to the September series indicates the optimism of the traders, though markets will be a bit cautious ahead of Janet Yellen's speech . Market will see some recovery with the Reserve Bank of India (RBI) announcing a raft of measures to boost investor participation and market liquidity in both the corporate bond and currency markets. These include the staggered reduction of banks' loan exposure, increased participation by overseas investors in corporate bonds and making top-rated bonds eligible for borrowing from Reserve Bank for liquidity needs. Meanwhile, in a bid to keep nation's tax laws in conformity with changing times, the Income Tax Department has created a permanent mechanism for seeking inputs from its officers for changes required in the direct tax regulations. There will be some buzz in the gems and jewellary stocks on report that exports of gems and jewellery grew 11.7 percent to $ 11.4 billion during the first four months of the current fiscal, driven largely by demand in India's major markets like the US. PSU banks too will be in action on reports that the government is drawing up a contingency plan to support state-run banks should they collapse under the burden of bad loans.

The US markets made a marginally lower close in last session, adding losses posted in the previous session, as traders continued to look ahead to a speech by Federal Reserve Chair Janet Yellen on Friday. The Asian markets have made mostly a lower start ahead of a speech by Federal Reserve Chair Janet Yellen that may shed light on the US interest-rate outlook.

Back home, August series futures and options (F&O) contract expiry day turned out to be an extremely disappointing affair for the Indian markets as the local benchmarks capitulated to the unrelenting selling pressure amid extremely high volatility. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted into the negative territory despite getting off to a gap-up opening. 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. German business sentiment unexpectedly declined the most in more than four years in August in a sign that companies are waking up to the consequences Britain’s decision to quit the European Union will have on the economy. Further, market participants across the globe are keenly awaiting signals on key policy rates from US Federal Reserve Chair Janet Yellen at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming. On the domestic front, sentiments were undermined by the private report indicating that India Inc is enduring its worst earnings drawdown of the last 20 years, burdened by weak growth, high interest costs with excessive private sector debt and over-capitalised balance sheets. Also raising anxiety among investors Reserve Bank Deputy Governor S. S. Mundra said the level of bad loans and restructured assets rose to 12%, while for the public sector banks it has jumped to 15.4% as of the June quarter. However, investors got some comfort with Goldman Sachs’ report that Indian economy is expected to clock 7.9 per cent growth in the current fiscal driven by better monsoon, government pay hike, key reforms and FDI inflows. On the global front, Asian equity markets remained under pressure. Back home, the local benchmark got off to a positive start in the morning trade as investors sentiments got buoyed after Commerce and Industry Minister Nirmala Sitharaman pitched for as much as 200 basis points or 2%, interest rate cut by RBI to help the cash-starved MSME sector. Finally, the BSE Sensex slumped by 224.03 points or 0.80% to 27835.91, while the CNX Nifty dropped 58.10 points or 0.67% to 8,592.20.