Markets to make a soft start on geo-political worries

The Indian markets after a choppy trade ended marginally in red in the last session after the Reserve Bank of India in its first monetary policy meeting decided to keep the repo rate unchanged. Today, the start is likely to be in red tailing the Asian peers and the markets will be showing the impact of geopolitical tension with US launching cruise missiles attack against Syria. Marketmen will also be analyzing the RBI’s stance which has now turned to liquidity control, while the repo rate was kept unchanged, the reverse repo rate was increased to 6 percent and the Marginal Standing Facility (MSF--the amount one can borrow from the RBI beyond the repo under specified conditions) was decreased to 6.5 percent. It has also projected retail inflation to increase to 5 percent in the second half of the current fiscal citing risks of El Nino impacting the monsoon and one-off effects of the Goods and Services Tax. Market however, may get some support with the Rajya Sabha passing four supplementary legislations which will enable the government to rollout the landmark Goods and Services Tax Bill on July 1. Also, the Lok Sabha passed a bill which will ensure continuance of levy of excise on petroleum products and abolition of cess on some other items following GST rollout from July 1. There will be some buzz in the aviation stocks on a report that India`s domestic passenger traffic grew by 17 percent in February.

The US markets closed modestly higher in last session but were off the highs of the day, as traders looked ahead to the release of the Labor Department's closely watched monthly jobs report on Friday. The Asian markets have made mostly a soft start with some indices suffering cut of around half a percent, after the US launched a cruise missile attack against Syria two days after Bashar al-Assad’s regime used poison gas to kill scores of civilians.

Back home, Indian equity benchmarks showed smart recovery despite snapping the day in the negative territory as they managed to outclass most of the Asian and Europe peers by fat a margin. Sentiments got a boost after the Reserve Bank of India (RBI) projected India's growth to strengthen to 7.4% in 2017-18 from 6.7% in 2016-17. The central bank has maintained status quo on policy rate by leaving the repurchase rate (or repo rate) unchanged at 6.25% in its first bimonthly policy of FY18. However, it raised the reverse repo rate by 25 basis points to 6%. Further, RBI projected inflation to average around 4.5% in the first half of 2017-18 and 5% in the second half. Investors also got some confidence with Asian Development Bank's (ADB) report that India's growth rate will improve to 7.4% during 2017-18 and go up further to 7.6% in the next fiscal. According to the ADB, India has taken a host of economic reforms initiative, including the Goods and Services Tax (GST) and liberalization of the FDI regime, with a view to improve business climate and promote growth. Some support also came after the country's services sector registered second straight month of growth in March, driven by strong rise in new work orders amid softer inflationary pressures. The Nikkei India Services Purchasing Managers' Index (PMI), which tracks the services sector output on a monthly basis, rose from 50.3 in February to 51.5 in March. Meanwhile, Real estate shares gained traction after RBI allowed banks to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Further, shares of railway related companies such as Texmaco Rail & Engineering, Kernex Microsystems and Stone India surged after the government approved setting up of Rail Development Authority. Finally, the BSE Sensex decreased 46.90 points or 0.16% to 29927.34, while the CNX Nifty was down by 3.20 points or 0.03% to 9,261.95.