Markets to get a soft to cautious start ahead of Fed’s policy decision

The Indian markets after losing their momentum in the final hours, managed a flat closing in the last session. Today, the start is likely to remain cautious with traders looking ahead to the US Federal Reserve's monetary policy decision due later in the day. There will be some concern with a private report stating that  Indian employers expect steady hiring outlook for next three months, but their confidence have dipped to the least optimistic level since 2005 amid uncertainties in global markets. However, some support can come with reports that the government is working on a new industrial policy with a view to promoting and developing frontier technologies, innovation and enhancing competitiveness of domestic products. Also, the government has put an end to speculation that the rollout of the goods and services tax (GST) will be delayed, with revenue secretary Hasmukh Adhia and the Central Board of Excise and Customs (CBEC) saying the tax reform is on track for July 1 rollout. There will be buzz in the PSU banking space, as the Reserve Bank of India (RBI) has said it had identified 12 of the largest loan defaulters and would order lenders to start bankruptcy proceedings against them to start unclogging the $150 billion in bad debt. Also, the RBI is looking into request for extending the NPA classification period from the current 90-day window to help small and medium enterprises.

The US markets bounced back and the Dow and the S&P 500 both climbed to new record closing highs. The gains were partly due to bargain hunting, with traders picking up stocks at relatively reduced levels, though there was some cautiousness too ahead of tomorrow's Federal Reserve announcement on monetary policy. The Asian markets have made a cautious start though many of the indices in the region are in green, tailing the record closing highs overnight on Wall Street.

Back home, Indian equity benchmarks showed a volte-face on Tuesday as what started on a promising note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory despite getting off to a gap-up opening. Marketmen were optimistic for most part of the session, as softer-than-expected inflation data fuelled hopes of a rate cut by the central bank at its next policy review in August. Data released late on Monday showed consumer inflation easing to 2.18% in May, helped by a drop in food prices - the lowest since India started publishing an economy-wide consumer price index in 2012. Some support also came with Union Finance Minister Arun Jaitley’s statement that the Reserve Bank of India (RBI) was at a fairly advanced stage of preparing a list of borrowers from whom non-performing assets (NPAs) of public sector banks could be recovered under the Insolvency and Bankruptcy Code. The move would help beleaguered public sector banks (PSBs) recover part of their NPAs, estimated at over Rs 6 lakh crore. However, the sanguinity in local markets was under check as profit booking in IT, Metal  and Auto counters exerted downside pressure on the frontline indices and dragged near the psychological 9,600 (Nifty) and 31,100 (Sensex) levels. Investors turned jittery ahead of the US Federal Reserve's two-day policy meeting that kicks off later today where they are widely expected to hike the policy rate this time. Adding the pessimism among investors, Industrial production growth slipped to 3.1% in April compared to the same period last year, when industrial production grew by 6.5%, though it was better than last month. Finally, the BSE Sensex gained 7.79 points or 0.03% to 31103.49, while the CNX Nifty was down by 9.50 points or 0.10% to 9,606.90.