Markets to make a cautious start on muted global cues

The Indian markets managed a modestly positive close in last session, coming off their weak opening. Today, the start is likely to be a bit cautious on muted global cues and traders attention will be now on the two-day policy review by RBI’s monetary policy committee (MPC) starting today. Meanwhile, Prime Minister Narendra Modi has reviewed preparations for the rollout of the goods and services tax (GST) regime from July 1, and said it would be "a turning point" for the economy. He has asserted that the implementation of GST is the culmination of the concerted efforts of all stakeholders, including political parties, trade and industry bodies. Finance Minister Arun Jaitley too clearing the air on audit of the firm providing IT backbone for GST has said the Comptroller and Auditor General of India will audit the Goods and Services Tax Network (GSTN). Markets will be getting some support with a private report that India has surpassed China to secure the top position among 30 developing countries on ease of doing business. There will be some buzz in the IT sector on a report that top seven Indian-based outsourcing companies in the US received fewer H-1B visas in 2016 as compared to 2015, and as a group their numbers dropped 37 per cent.

The US markets snapped their gaining streak and ended modestly lower in last session after a lackluster trade, as traders expressed some uncertainty about the near-term outlook for the markets following recent strength. The Asian markets have made mostly a lower start tailing the US counterparts, with investors opting for a note of caution following a seven-week surge for global stocks. Japanese market too was lower, as the yen rose to the highest level in more than a month.

Back home, Indian stock markets, which appeared to be wandering on a directionless trajectory through the morning trades, witnessed some renewed buying interests in Consumer Durables and Realty counters during the noon session, which helped the equity indices to snap second straight session on a positive note. The gains were, however, capped as investors remained cautious ahead of the Reserve Bank of India (RBI)'s policy meeting, which begins tomorrow. Market is hoping that RBI may review its current stance of neutral to accommodative considering the slowdown in economic activity and consolidation in current & future outlook in inflation. Furthermore, HSBC's latest report indicated India's economic growth is expected to remain flat at 7.1% in current fiscal as investment is still weak and government spending might not be as high given the fiscal consolidation. According to the global financial services major, the GDP growth momentum is slowing since mid-2016 and this trend is expected to continue going forward. Sentiments got a boost with the report that Services sector activity in India grew at the fastest pace in four months in May riding piggyback on higher work orders as companies inducted more people to cope with greater workloads. The Nikkei India Services Purchasing Managers' Index (PMI), which tracks services sector output on a monthly basis, rose from 50.2 in April to 52.2 in May. Some support also came with World Bank report indicating that successful demonetization will help in raising revenues on sustained basis as more and more people will come under the tax net. During 2016-17, India generated additional tax revenues as unreported cash identified both through the amnesty scheme and demonetisation were brought under the tax net. Meanwhile, shares of jewellery companies rose sharply today, following the government's announcement of GST rates on gold. The GST Council on Saturday announced that the rate on gold and gold jewellery would be at 3%, while the import duty of 10%, which will be over and above the 3%, remains unchanged. Currently, tax on gold and jewellery is at 2% and the current GST rate is slightly higher at 3%, but lower than the 5% rate that was expected. Finally, the BSE Sensex gained 36.20 points or 0.12% to 31309.49, while the CNX Nifty was up by 21.60 points or 0.22% to 9,675.10.