Markets to make a cautious start on mixed global cues

The Indian markets gave up all their gains in final hours to end flat with just a positive bias in last session, tracking weak cues from European markets. Today, the start is likely to remain cautious tailing mixed global cues. Markets however, may get some support with Reserve Bank Governor Urjit Patel’s statement that he is not 'overly pessimistic' about employment scenario in the IT sector, pointing out that mushrooming startups can compensate for job losses. Meanwhile, the Union Cabinet passed a resolution expressing gratitude to Chief Ministers of States and others for their cooperation in introduction of GST, calling it the biggest tax reform in independent India. The banking stocks will be in focus with credit rating agency ICRA stating that asset quality pain for banks is expected to continue in financial year 2018 due to restructuring by banks, weakness in some large corporate accounts and moves like waiver of farm loans.  On the same time IT stocks may come under pressure as Industry body Nasscom has projected that India's IT industry is expected to grow at the slowest pace in nearly a decade as clients defer spending in the face of geopolitical uncertainties. Software export growth in financial year 2017-18 is projected at 7-8 per cent in constant currency terms, down from 8.6 per cent last year.

The US markets continued their lackluster performance and made another mixed closing in the last session, though in early trade stocks benefited from a positive reaction to the release of the details of the Senate Republican plan to repeal and replace Obamacare. The Asian markets too have made a mixed start, even though oil halted its losing streak. Chinese equities remain in the limelight as the nation’s banking watchdog raised scrutiny on some of the biggest dealmakers.

Back home, Indian equity markets showed a volte-face on Thursday as what started on a confident note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade, tracking weak trend seen in European markets, while investors also took cues from the minutes of Reserve Bank of India's (RBI) June policy meeting. The central bank’s monetary policy committee wants more evidence that inflation has sustainably fallen below its target before deciding whether to lower interest rates. RBI voted 5-1 to keep the repo rate at 6.25% earlier this month, but issued a slightly less hawkish statement after consumer inflation eased to 2.99% in April, below its 4% target. Marketmen were optimistic for most part of the session, as sentiments remained upbeat with the report that economic think-tank NCAER revised up its projection for the country's economic growth to 7.6% for the current fiscal, compared with the earlier prediction of 7.3% on forecast of normal monsoon. In its quarterly review of the economy, NCAER said prospects for the agricultural sector in 2017-18 remain optimistic on forecast of good rains. The agency has also revised upward its forecast of GVA (Gross Value Added at Basic Prices) growth at 7.3% for 2017-18 from its February estimate of 7%. However, the sanguinity in local markets was under check, as profit booking in metal and Real Estate counters exerted downside pressure on the frontline indices and dragged them even below to the psychological 9,650 (Nifty) and 31,300 (Sensex) levels. Moreover, the broader markets too succumbed to the selling pressure and went home with cuts of over half a percent. In a key decision, the market regulator SEBI banned participatory notes (p-notes) from taking naked positions in the derivatives segment, and eased the entry process for foreign portfolio investors (FPIs). It also removed the one-year lock-in requirement for private equity investors registered as alternative investment funds (AIFs) in initial public offerings (IPOs). Finally, the BSE Sensex gained 7.10 points or 0.02% to 31290.74, while the CNX Nifty was down by 3.60 points or 0.04% to 9,630.00.