Markets likely to make flat-to-negative start

Indian markets ended in red on Friday as traders remained on sidelines ahead of Karnataka state elections scheduled to be held on May 12. Today, the markets are likely to make flat-to-negative start as underlying sentiment may remain cautious amid rising oil prices and mixed Asian cues. Traders also keep an eye on macro data on industrial output and inflation. Traders will remain concern after Srini Raju, Member of the ISB Executive Board, cautioning against the possibility of trade imbalances if corrective measures are not taken, said India may have to shell out huge forex reserves in the changing economic order. However, traders will get some encouragement later in the day with ADB Chief Economist Yasuyuki Sawada’s statement that India’s projected GDP growth of over 7 per cent for the current fiscal is amazingly fast and if this momentum is maintained the size of the economy can double within a decade. The country shouldn’t worry about not achieving 8 per cent growth but focus on increasing domestic demand by reducing the income inequality, he said. Traders will also get some support with Commerce and Industry Minister Suresh Prabhu’s statement that the government is working on a strategy to promote services exports which have the potential to boost overall foreign shipments and economic growth. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended higher on Friday as investors reacted positively to the Labor Department's closely watched monthly employment report. The Labor Department said non-farm payroll employment climbed by 164,000 jobs in April. Asian markets were trading mixed on Monday despite the strong showing on Wall Street as investors digested last week’s trade talks and U.S. jobs numbers.

Back home, extending previous session’s southward journey, Indian equity benchmarks ended the dismal day of trade with a cut of over half a percent on Friday. Sentiments remained downbeat since morning as markets after a negative start never looked confident and extended their southward journey to end below their crucial 35,000 (Sensex) and 10,650 (Nifty) levels. The domestic sentiments remained cautious with a report stating that bank deposit growth falls to a five-decade low to 6.7 percent in the fiscal year ended March 2018. Bankers said the reversal from the huge deposits post demonetisation and the steady movement of savings away from bank deposits has hit growth. Anxiety also remained on the street with the credit ratings agency, ICRA’s latest report that the high quantum of non-performing asset (NPA) will restrict the overall bank credit growth to a moderate 7-8% in fiscal 2018-19, despite recapitalisation of public sector banks (PSBs) and private sector players upping their game with a 25 percent credit growth. It also said that India Inc will borrow more from cheaper sources abroad. Traders failed to take any sense of relief with report highlighting 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. Market participants shrugged off 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. The investors also paid no heed towards the report stating that activity in India’s services sector grew at the fastest pace in month of April, on the back of greater inflows of new work. According to the survey report, the seasonally adjusted Nikkei Services Business Activity Index remained above the neutral mark of 50.0 in April, posting reading at 51.4, up from 50.3 in March. The Nikkei India Composite PMI Output Index which measures both manufacturing and services too climbed to 51.9 in April from 50.8 in March. Finally, the BSE Sensex declined 187.76 points or 0.53% to 34,915.38, while the CNX Nifty was down by 61.40 points or 0.57% to 10,618.25.