Markets to get a cautious but mildly green start

The Indian markets after a weak start remained below the neutral line throughout the day in last session and ended with cut of around half a percent. Today, the start is likely to be in green on signs of recovery in the global markets and on getting double dose of good macro data. India's industrial production grew by 3.1 percent in April due to good performance of electricity, mining and manufacturing sectors, while retail inflation fell to a record low of 2.18 percent in May, as prices of kitchen staples like vegetables and pulses declined sharply. However, there will be some cautiousness from the global front as the US Federal Reserve’s two-day rate-setting meeting kicks off later today. While the Fed is widely expected to hike the policy rate this time, markets will also keenly watch its communication on US economic growth and future rate hike trajectory.  There will be buzz in the banking sector stocks, as the government and the RBI on Monday indicated that they will step up efforts to clean up bank books that are saddled with record non-performing assets (NPAs), including through the National Infrastructure Investment Fund (NIIF). Meanwhile, Finance Minister Arun Jaitley has said the union government will not partake in state’s fiscal leverage in waiving farm loans and made it clear that the cost has to be borne by them.

The US markets despite coming off the day’s low ended modestly in red in the last session, tech-heavy Nasdaq continued underperforming its counterparts, pulling back further off the record closing high set last week. The overall weakness was partly contributed by profit taking, with traders cashing in on some of the recent strength in the markets. The Asian markets have once again made a mixed start, though some of the indices are recovering, as selloff in technology shares showed signs of easing.

Back home, Indian markets made a nervous start to the week as the benchmarks plummeted over half a percent, as investors took profits off the table ahead of IIP and inflation data due later in the day. Sentiments remained dismal, as the State Bank of India expressed concern that demonetisation, announced in November 2016, may continue to result in slowing down of the economy, and adversely affect its business. It said that the long-term impact of this move on the Indian economy and the banking sector is uncertain. Besides, weak global cues coupled with depreciation in Indian rupee against the dollar too weighed down sentiments. The frontline indices shaved off over half percent and breached 31,100 (Sensex) and 9,650 (Nifty) levels on the downside. The broader markets too mirrored their larger peers and drifted to lower levels to snap the day on a pessimistic note. Some concerns also came after government of Maharashtra on Sunday announced a loan waiver for farmers and decided to form a committee to decide the criteria of debt relief. The loan waiver of around Rs 30,000 crore will affect the state fiscal and 'impact the credit discipline' among borrowers. Further, market participants failed to get any sense of relief with the report that the southwest monsoon is making a steady advance into Maharashtra & West Bengal and the weatherman has predicted a good week ahead. India Meteorological Department Director General KJ Ramesh said monsoon is in an active phase and has reached Mumbai, Mahabaleshwar (in Maharashtra) and several parts of the Konkan region, apart from Bijapur district in north Karnataka. Finally, the BSE Sensex declined 166.36 points or 0.53% to 31095.70, while the CNX Nifty was down by 51.85 points or 0.54% to 9,616.40.