Markets to make negative start on weak global cues

Indian equity markets swung between gains and losses before closing largely unchanged on Tuesday as traders opted to book some profits following the previous session’s sharp rally. Today, the start of the session is likely to be on negative side on weak global cues. Traders will also remain concern on report that the Reserve Bank of India (RBI) is unlikely to reduce key policy rates in 2018 despite a dip in retail inflation in February. Risks like the higher minimum support prices (MSPs) for food grains promised in the budget, according to them, can push up the inflation in the next fiscal year. Meanwhile, the Centre has released Rs 28,398 crore as GST compensation to states for July-December, with Karnataka getting a major pie. The government has lowered the indirect tax revenue collection forecast in the revised estimates by Rs 51,856 crore to Rs 8.75 lakh crore in the current fiscal. As per the Budget estimates, over Rs 9.26 lakh crore was to be collected from indirect taxes. Traders will get some support with report that revival in rural demand, increased infrastructure spending is likely to drive India's growth in current year, even as increasing debt and trade protectionism could pose a challenge. There will be buzz in textile related stocks on report that the Textiles Ministry should impress upon the Finance Ministry to reconsider the overall GST structure for textiles sector and impose higher anti-dumping duty to protect the domestic industry.

The US markets closed lower on Tuesday amid renewed geo-political concerns after President Donald Trump fired Secretary of State Rex Tillerson. Traders largely shrugged off a report from the Labor Department showing a modest increase in consumer prices in the month of February. Asian markets were trading in red terrain on Wednesday, following the sacking of U.S. Secretary of State Rex Tillerson, and amid talk of potential U.S. tariffs against China.

Back home, Indian equity benchmarks witnessed consolidation on Tuesday as traders opted to book profit after yesterday’s rally. Though, markets started the session on an optimistic note with traders reacting positively to the Index of Industrial Production (IIP) numbers, as strong manufacturing growth and a rebound in the consumer durables sector lifted India's factory production to 7.5% in January from 7.1% in December. As per the street expectation it was likely to come at 6.6%. The cumulative growth for the period April-January 2017-18 over the corresponding period of the previous year stood at 4.1%. Some support also came with report that Inflation as measured by the CPI slowed to 4.44% in February from 5.07% in January, mostly due to easing food and fuel prices. Inflation in the food and beverages segment slowed to 3.38% in February from 4.58% in the previous month. Markets gained momentum as some support came with report that foreign direct investment (FDI) has increased steadily in the country with total capital inflows reaching $208.99 billion during April 2014 to December 2017 period. The main sectors that received maximum foreign inflows include services, computer software and hardware, telecommunications, construction, trading and automobile. However, markets took U-turn and entered into red terrain as traders turned anxious with private report raising concerns that even as the economy has largely recovered from the shocks of demonetization and GST implementation, micro enterprises with borrowings of under Rs 10 lakh are yet to fully recover. The report reiterated that the situation has improved in all segments except those with borrowings less than Rs 50 lakh, where the systemic exposure has not caught up with pre-demonetization levels. Separately, a report showed that India’s monsoon rains are expected to be slightly below normal this year, while parts of Australia’s eastern grain belt could be drier as an El Nino weather pattern may develop in the second half of 2018. Finally, the BSE Sensex shed 61.16 points or 0.18% to 33,856.78, while the CNX Nifty was up by 5.45 points or 0.05% to 10,426.85.