Markets to get a somber start on weak global cues

The Indian markets after a lackluster trade ended mildly in red in the last session. Today, the start is likely to remain somber and the markets will follow the global trend. Traders will be concerned with the inclusion of Chinese mainland stocks to the MSCI index, which could lead to hundreds of billions of dollars worth of share purchases, shrinking shares of other emerging markets, including India. Traders may however get some support with finance minister Arun Jaitley’s statement that the Centre will stick to its fiscal deficit target of 3.2% of gross domestic product (GDP) for 2017-18. Jaitley also made it clear that the Centre has no plans to announce any farm loan waiver. There will be some action in the textile stocks, as the rating agency ICRA in its latest report has said that the impact of the Goods and Services Tax (GST) is likely to be neutral to positive across segments in the textile industry compared to the current tax regime. There will be buzz in the oil stocks too, as the international crude oil prices slumped by around 2 percent overnight. The housing finance companies may come under pressure on a ICRA report that housing credit growth moderated to 16 per cent in 2016-17 from 19 per cent in 2015-16.

The US markets ended mostly in red and the Dow and the S&P 500 pulled back off yesterday's record closing highs, amid a sharp drop by the price of crude oil and lacking any major US economic data in last session. The Asian markets have made a soft start and some of the indices led by the Japanese market are down by about a quarter percent. Chinese market too was mildly in red despite the MSCI Inc. adding the nation’s domestic stocks to its emerging-markets index.

Back home, it turned out to be a vulnerable performance from Indian benchmark indices on Tuesday, as they failed to snap the session in the green territory and settled marginally below the neutral lines. Sentiments remained subdued after finance minister Arun Jaitley said that the economy will have to face short-term challenges in implementing the biggest tax reforms since Independence. He further added that the official launch of the GST will take place on the midnight of June 30 at a function, which will be organised in Central Hall of Parliament. 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. Shares of IT companies rose following overnight rebound in US technology stocks, while banking stocks declined after Punjab joined Maharashtra and Uttar Pradesh in announcing sops for farmers. Punjab Chief Minister Amarinder Singh on Monday announced a total waiver of entire crop loans of 8.75 lakh small and marginal farmers. Some concerns also came with report that foreign portfolio investors (FPIs) sold shares worth a net Rs 250 crore on June 19, 2017. However, the downside risks for the frontline indices was limited by Fitch Ratings' latest report indicating that India's economic growth is expected to rise by 7.4% and 7.6% in the next two fiscal years. The rating agency added that the investment in India is also expected to witness gradual rise owing to transmission of supportive monetary policy along with the government's various structural reforms. Some support also came with India, pitching for a greater engagement with BRICS (Brazil, Russia, India, China and South Africa) nations on issues the international community addressed during BRICS Foreign Ministers meeting in Beijing. Meanwhile, Airline stocks such as SpiceJet, IndiGo and Jet Airways gained traction after passengers carried by domestic airlines grew by close 18% to 465.87 lakhs during January-May 2017 as against 396.04 lakhs in the corresponding period of previous year.  Finally, the BSE Sensex declined 14.04 points or 0.04% to 31297.53, while the CNX Nifty was down by 4.05 points or 0.04% to 9,653.50.