Markets to make a cautious start ahead of the RBI’s policy announcement

The Indian markets declined in last session with traders taking a cautious bet ahead of the RBI’s monetary policy decision. Today, the start is likely to remain cautious and all eyes will be on the Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, meeting outcome with general view that the central bank is likely to hold key rates even as the government is making a case for a lower interest regime citing low inflation. Traders however may get some support with NITI Aayog CEO Amitabh Kant’s statement that the Goods and Services Tax, to be rolled out next month as the biggest tax reform since independence, will help India achieve 9 percent growth rate. He said GST will simplify India's taxation system and help deal with tax evasion. Also, the Met Department has upgraded the South-West monsoon forecast to 98 per cent of the long-term average rainfall from 96 per cent earlier. Rainfall during the June-September monsoon season is expected to be normal, with a high possibility of all four broad geographical regions receiving evenly distributed rains. Meanwhile, the government has said that post the abolition of the FIPB, ministries will have to decide on FDI proposals within 60 days of the application and any rejection will need concurrence of the DIPP.

The US markets extended their weakness and ended lower in the last session after another choppy day of trade, amid uncertainty ahead of key events later this week, including the U.K. election, the ECB meeting and former FBI Director James Comey’s congressional testimony. The Asian markets have made a mixed start with some indices trading in red. There was cautiousness ahead of a barrage of events due in the next two days.

Back home, Indian benchmark indices witnessed a dismal trading session on Tuesday, as investors turned jittery ahead of the Reserve Bank of India’s (RBI) monetary policy review meet tomorrow. With the excess liquidity in the banking system, RBI is unlikely to cut interest rates on Wednesday to tackle a growth slowdown. The central bank is still grappling with more than $60 billion in excess liquidity after the government’s crackdown on high-denomination notes last year, even after raising the reverse repurchase rate in April and deploying an array of instruments to soak up the funds. Sentiments also remained subdued with the report that Indian companies raised around Rs 33,400 crore in May through private placement of corporate bonds, a slump of 44% from the year-ago level, for business expansion and propping up working capital needs. According to latest data available with markets regulator SEBI, firms garnered a total of Rs 33,389 crore in May 2017, lower than Rs 59,801 crore raised in the year-ago period. Besides, weak trend in Asian stocks also weighed on the trading sentiments. However, losses remained capped with the report that India has surpassed China to secure the top position among 30 developing countries on ease of doing business. The 2017 Global Retail Development Index (GRDI), now in its 16th edition, ranks the top 30 developing countries for retail investment worldwide and analyses 25 macroeconomic and retail-specific variables. Meanwhile, the progress of the monsoon continues to be stuck along the Kochi-Tondi-Agartala-Williamnagar-Kokrajhar axis linking the west coast and North-East India but it is a matter of a few days before it resumes its northward journey. Even in Kerala, the rains are yet to reach the northern districts beyond Ernakulam and Thrissur, according to trends in recorded rainfall till Monday. Finally, the BSE Sensex lost 118.93 points or 0.38% to 31,190.56, while the CNX Nifty was down by 37.95 points or 0.39% to 9,637.15.