Markets to make a weak start reacting to Fed decision to hike rates

The Indian markets despite choppiness managed a modestly positive close in the last session, led by the banking sector on reports that RBI is pushing for bankruptcy proceedings against 12 corporate borrowers. Today, the start is likely to be in red on weak regional cues, as the US Federal Reserve raised interest rates, citing continued US economic growth and job market strength, and announced it would begin cutting its holdings of bonds and other securities this year. On the domestic front some support can come with the Union Cabinet approving the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017. The Bill would provide for a comprehensive resolution framework for specified financial sector entities to deal with bankruptcy situation in banks, insurance companies and financial sector entities. There will be some buzz in the agri and banking stocks, as the Union Cabinet has also approved the interest subvention scheme (ISS) for farmers for the year 2017-18 which will help farmers getting short term crop loan up to Rs 3 lakh payable within one year at only 4 percent per annum. The government has earmarked a sum of Rs 20,339 crore for this purpose. The telecom stocks too will be buzzing, as the four large banks, including the SBI, called on the government to boost liquidity in troubled telecom companies, cautioning that the financial stress may lead to potential defaults.

The US markets made a mixed closing in the last session, after the Federal Reserve raised its benchmark interest rate for the third time in three months despite signs the US economy cooled off in 2017. The Asian markets have made mostly a soft start with some indices witnessing cut of over half a percent tailing the US markets and on a report that investigators are probing whether President Donald Trump attempted to obstruct justice.

Back home, Indian equity markets started the session on a sluggish note but managed to eke out some gains by the end of trade, as the benchmark indices clawed back into the green terrain in the late afternoon trade on getting some supportive leads from the European markets ahead of US Federal Reserve's policy outcome. Besides, sentiments got a boost after the report that Inflation based on the wholesale price index (WPI) slipped to a five-month low of 2.17% in May, as food inflation turned negative and prices of manufactured items rose at their weakest pace in the past five months. Some support also came 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. However, gains remained capped 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. Further, traders remained cautious over the private report indicating that over 65% of the total Rs 9.50 lakh crore of agri debt may potentially get written-off. Maharashtra followed Uttar Pradesh in announcing a debt waiver for the farmers, which is expected to drill Rs 30,000 crore hole for the state exchequer. Meanwhile, India's engineering exports to Doha have been hit following sanctions imposed on Qatar by some nations including Saudi Arabia. Middle East and West Asia are one of the key destinations for Indian engineering exports, accounting for 13% of the country's total engineering exports. Finally, the BSE Sensex gained 52.42 points or 0.17% to 31155.91, while the CNX Nifty was up by 11.25 points or 0.12% to 9,618.15.