Markets to get a flat-to-positive start of the new week

The Indian markets lost around half a percent in the last session, showing a lackluster performance and markets remaining in red through the session despite a positive opening. Today, the start is likely to be flat-to-positive. Traders will be eyeing outcome of US President Donald Trump and Prime Minister Narendra Modi meeting, seeking to boost US-Indian relations despite differences over trade, the Paris climate accord and immigration. There will be some buzz in the mining stocks, as the world’s biggest coal users China, the United States and India have boosted coal mining in 2017, in an abrupt departure from last year’s record global decline for the heavily polluting fuel and a setback to efforts to rein in climate change emissions. The production through May is up by at least 121 million tons, or 6 per cent, for the three countries compared to the same period last year. Banking stocks will also be in focus after the Reserve Bank of India (RBI) has directed banks to keep higher provisions against all cases referred for bankruptcy proceedings. Meanwhile, the finance ministry has made a case for pushing back the Reserve Bank’s deadline for implementing Basel III banking norms in view of higher capital requirement to deal with bad loans which have reached unacceptable levels.

The US markets ended mostly in green in last session, however gains remained capped as traders seemed uncertain about the near-term outlook for the markets after the Dow and S&P 500 reached record highs last week. Sentiments also remained dampened on report that new orders for U.S. manufactured durable goods fell by more than expected in the month of May. The Asian markets have made mostly a positive start with, some indices gaining about half a percent. The Japanese market was trading with traction, as a weaker yen boosted shares of exporters.

Back home, Indian markets finished last trading session of the week on a daunting note, as the frontline equity indices failed to showcase any kind of resilience and kept drifting around lower levels. Sentiments remained subdued with the report that funding of crop loan waivers is likely to worsen the fiscal deficit and leverage levels of state governments with gross state development loans issued by the state governments expected to rise by Rs 70,000 crore in FY2018. So far, Maharashtra and UP have waived nearly 30-40% of outstanding agri-bank credit, while for Punjab it was 15%. The NSE’s 50-share broadly followed index, Nifty dipped below the psychological 9,600 support level, while the Bombay Stock Exchange’s sensitive index, Sensex a saw triple digit fall to sink below the crucial 31,200 mark. Meanwhile, caution is likely to prevail in the near term as India gears up to unveil a nationwide goods and services tax (GST) on July 1, while monitoring global factors such as falling crude prices. Some weakness also came with the report that asset quality pain for banks is expected to continue in fiscal year ended March 2018 due to restructuring by banks, weakness in some large corporate accounts and events like waiver of farm loans. It expects gross non-performing assets (GNPAs) of Indian banks to increase to 9.9% to 10.2% by March 2018 from 9.5% in March 2017 with fresh slippages of loans expected at 3% to 4% in the fiscal. Investors failed to get any sense of relief 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. He also highlighted that the soon-to-be implemented GST will not only create a national market but will also broaden the tax base which in turn will lower the overall taxes in the long-term. Finally, the BSE Sensex declined 152.53 points or 0.49% to 31138.21, while the CNX Nifty was down by 55.05 points or 0.57% to 9,574.95.