Markets to make a flat-to-cautious start on mixed global cues

The Indian markets suffered sharp cuts in the last session with major benchmarks deposing over half a percent, dragged down by banking pack on concern that their net interest margins will come down in a low interest-rate environment. Today, the start is likely to be mildly in green but cautiousness will prevail on global developments. There will be buzz in the banking sector stocks, as the Lok Sabha passed the Banking Regulation (Amendment) Bill, 2017, after Finance Minister Arun Jaitley declared that criminal and recovery proceedings will be started against defaulters of bank loans who divert money and asserted that no one can claim equality in not repaying loans to the banks. The textile stocks too may see some action, as foreign direct investment (FDI) in textile sector more than doubled to $618.95 million during 2016-17 from $230.13 million in the previous fiscal. The aviation stocks will be in focus, as a global airline association, the International Air Transport Association (IATA) has said that India's domestic passenger traffic grew by 20.3 per cent in June. There will be lots of earnings reaction to keep the markets in action.

The US markets made a mixed closing in last session ahead of the monthly jobs data. Trade remained lackluster even though a report from Labor Department showed a modest decrease in first-time claims for unemployment benefits in the week ended July 29th. The Asian markets have made a mixed start too, awaiting the monthly US jobs report and on buzz that U.S. Special Counsel Robert Mueller was said to have impaneled a grand jury in the ongoing Russia probe.

Back home, extending southward journey for second straight session, Indian equity benchmarks ended the session with a cut of around three fourth of a percent, breaching their crucial 32,300 (Sensex) and 10,050 (Nifty) levels. Markets showed solemnity since beginning and never looked confident of recovering till end to close near intraday lows, as investors opted to remain on sidelines pondering rate outlook, a day after the RBI maintained its neutral stance, citing record low inflation. Most of the market participants are not expecting any further rate cut this year, saying the present low inflation print is not sustainable. Sentiments also remained dampened with report showing that the services sector contracted in July and fell to its lowest level in nearly four years following implementation of the Goods and Services Tax (GST). Nikkei India Services Purchasing Managers’ Index fell to 45.9 in July. Some concern also came with the Reserve Bank’s third bi-monthly monetary policy statement that farm loan waivers by state governments could result in possible fiscal slippages and undermine the quality of public spending. Some concerns also came with the private report stating that more than 31 percent of the chief financial officers (CFOs) from various companies feel implementation of GST is challenging and manufacturing is the most affected sector. Market participants shrugged off Finance Minister Arun Jaitley’s indications that there could be scope for rationalisation of rates under the GST as its implementation progresses. Jaitley also said that he was under pressure to change the GST Network which people said was faulty but felt the structure was correct. Traders also failed to get any solace with John Chambers’, Chairman of the newly-formed US-India Strategic Partnership Forum, prediction that India would turn out to be a role model for the world economies. He said India will figure among the top three economic powers in the world over the next 10-15 years. Finally, the BSE Sensex declined 238.86 points or 0.74% to 32,237.88, while the CNX Nifty was down by 67.85 points or 0.67% to 10,013.65.