Markets to make optimistic start amid firm global cues

Indian markets ended slightly in red on Thursday as investors stayed on the sidelines ahead of assembly elections in Karnataka. Today, the markets are likely to make an optimistic start amid firm global cues. Traders will get some support with External Affairs Ministry Spokesperson Raveesh Kumar’s statement that India was closely monitoring the situation arising out of Trump’s announcement to pull the US out of the Iran deal. India will take necessary measures to offset any adverse impact on its interests due to US President Donald Trump's decision to dump the Iran nuclear deal. However, there will be some concern on private report stating that continuing fall in the rupee will push trade deficit up to a four-year high of $178.1 billion or 6.4 per cent of GDP this fiscal year. The estimate comes amid a depreciation in the rupee against the dollar, wherein it has shed over 5 per cent to breach the Rs 67-mark to the dollar. There will be buzz in telecom stocks after Reliance Jio launched a new postpaid plan starting at Rs. 199 per month that will redefine postpaid services in the country. Stocks related to Hotel industry will be buzzing on report that the Authority for Advance Ruling (AAR) has said, Hotel or restaurant services provided to SEZ developers or units will not be treated as ‘zero-rated’ supplies and hence will be taxable under the Goods and Services Tax (GST) regime. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended in green on Thursday following the release of a Labor Department report showing a slightly smaller than expected increase in consumer prices in the month of April. Asian markets were trading higher on Friday, as signs of thawing relationships in the Korean peninsula and expectations that expansionary monetary policies will likely be in place for some more time helped fuel demand for riskier assets.

Back home, Thursday turned out to be a disappointing day of trade, where frontline gauges failed to hold on to their early gains and ended in red terrain, as traders remained on sidelines ahead of the outcome of the Karnataka Assembly elections which will have larger implications for the way the capital markets will view the future of reforms. Markets started the session on an optimistic note as traders took some encouragement with India Ratings’ report that the Indian economy is gradually coming out of the twin shock of demonetisation and GST which temporarily derailed growth. The ratings agency, however, cautioned on the possible widening of the current account deficit (CAD) due to rising oil prices which was creating pressure on the currency. Some support also came with Commerce Secretary Rita Teaotia’s statement that India is not expecting any major shift in trade with Iran following the US decision to re-impose trade sanctions against the Islamic nation. The bilateral trade between India and Iran has increased to $12.9 billion in 2016-17 from $9 billion in the previous fiscal. Additionally, Rita Teaotia said that the commerce ministry is working with different ministries to formulate separate plans for 12 services sector, including IT, tourism and logistics, with a view to boost growth in these segments. However, markets lost momentum and pared all of their gains in last leg of trade to end in red terrain. Sentiments turned pessimistic after International Monetary Fund (IMF) in its report highlighted that in India, given increased inflation pressure, monetary policy should maintain a tightening bias. The advice came at a time when oil poses an upside risk to the inflation. Earlier, the Monetary Policy Committee (MPC) had raised several areas of concerns, including high and volatile crude prices. Sentiments also remained dampened on Assocham’s statement that President Donald Trump’s announcement of the US pulling out from the Iran deal and his decision to re-impose sanctions on the key crude oil producer will exert pressure on fuel prices and affect the Indian economy on the downside. Finally, the BSE Sensex declined 73.08 points or 0.21% to 35,246.27, while the CNX Nifty was down by 25.15 points or 0.23% to 10,716.55.