Markets likely to make pessimistic start amid subdued global cues

Indian markets ended marginally in red on Thursday tracking weak global markets as the U.S. Federal Reserve signaled further gradual increases in the federal funds. Today, the markets are likely to make negative start amid weak global cues as investors await the U.S. jobs report due later in the day for directional cues. However, traders will get some support later in the day with report that private equity and venture capital investments in India reached $7.9 billion across 180 deals in January-March this year, the best first quarter since 2008, mainly driven by large transactions. Traders will also get some solace with report that India wants the Asian Development Bank (ADB) to increase lending to the world’s fastest growing economy to help bridge funding requirement for infrastructure development. Market participants will also get some encouragement with report that China has removed import duties on as many as 28 medicines, including all cancer drugs, from May 1, a move which would help India to export these pharmaceuticals to the neighbouring country. Meanwhile, ratings agency Icra said that the high quantum of impaired assets will restrict the credit growth for fiscal 2018-19 to 8 percent, and India Inc will borrow more from cheaper sources abroad. External commercial borrowings (ECBs) will go up to USD 27-32 billions on the back of relaxed norms announced by the RBI and the high rate of borrowing domestically. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended mostly lower on Thursday as investors fretted about the outcome of Sino-U.S. trade talks and a report on service sector activity disappointed. All the Asian markets are trading in red in early deals on Friday, with Japanese markets closed for a public holiday, as investors awaited the April jobs report out of the U.S.

Back home, Indian equity benchmarks ended the volatile day of trade with marginal losses, mirroring weak cues from global markets after the U.S. Federal Reserve sprang no surprises with its latest policy statement. Markets made pessimistic start as sentiments remained dampened on report that India has slipped by three spots to eleventh position in the FDI Confidence Index 2018 released by American global management consulting firm AT Kearney. India falls by three spots, reversing its two-year streak of rising in the rankings. The report also said that India fell out of the top 10 for the first time since 2015. Investors remained cautious with RBI’s research paper highlighting that bad loans have impaired monetary policy transmission in India as banks were unable to increase their lending rates and protect net interest margins (NIMs) amid a broad deterioration in asset quality between 2013 and 2017. The report showed that NIMs of public sector banks, which had large NPA/stressed assets, were negatively impacted, while NIMs of private sector and foreign banks were not. Markets pared almost all of their early losses in second half of the session as traders took some encouragement with report stating that Economic growth in India is expected to strengthen to 7.3 percent in financial year 2018-19 on the back of robust activity from construction, manufacturing, and services sectors. But, recovery proved short-lived and markets once again lost momentum and settled marginally in red. Sentiments turned pessimistic with a private report highlighting that tax authorities have asked many companies to reverse claims of input credit made on investments in mutual funds and other securities, in a move that could increase the tax burden on corporate India. The report added that notices were recently issued to companies such as Mahindra & Mahindra, Japanese automobile giant Honda, South Korean major Hyundai and pharma company Cipla, informing them that their claims of input tax credit on non-core services would not be allowed. Finally, the BSE Sensex declined 73.28 points or 0.21% to 35,103.14, while the CNX Nifty was down by 38.40 points or 0.36% to 10,679.65.