Markets likely to make flat-to-positive start

Indian markets ended on strong note on Friday ahead of Karnataka assembly election, quarterly earnings and positive global cues. Today, the markets are likely to make a flat-to-positive start amid steady global cues. Traders will get some support with Fitch’s report that India’s economic growth will accelerate to 7.3 per cent in the current fiscal and 7.5 per cent in the next as money supply has recovered to its pre-demonetisation level and disruptions related to the rollout of GST have diminished. Some support will come from report that the Finance Ministry has cleared an FDI proposal last month which will bring total foreign investment worth Rs 3,250 crore. However, traders may react negatively on report that Industrial output grew by 4.4 per cent in March, the slowest in five months, due to a fall in capital goods production and deceleration in mining activity. Industrial growth measured by the Index of Industrial Production (IIP) in 2017-18 too decelerated to 4.3 per cent from 4.6 per cent in the previous fiscal. Meanwhile, continuing downward trend, the country’s foreign exchange reserves fell by $1.426 billion to $418.940 billion in the week to May 4, due to decrease in foreign currency assets. In the previous week, the reserves had fallen by $3.216 billion to $420.366 billion. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended mostly higher on Friday benefited from the upward momentum seen in the two previous sessions, but gains remained capped as buying interest waned as traders seemed wary of continuing to pick up stocks. Asian shares were trading mostly in green to near two-month highs on Monday on signs the United States and China were toning down their trade war rhetoric, while Malaysian Ringgit hit a four-month trough in the first onshore trade since a shock election result last week.

Back home, bulls tightened their grip on Dalal Street on Friday with frontline gauges surpassed their crucial 10,800 (Nifty) and 35,500 (Sensex) levels, ahead of the Karnataka Assembly elections. The southern state will vote on Saturday and the poll outcome will be known on May 15. Markets started the session on positive note with traders taking support from 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. Traders shrugged off report highlighting 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. Markets extended rally in last leg as traders took some support from a private report which highlighting that India Inc’s mergers and acquisitions (M&As) tally rose eight-fold to $19.1 billion with 40 transactions in April, making it the highest monthly deal value recorded after March 2017. The report added that relative easing of regulatory ecosystem and consolidation across sectors has significantly driven the deal activity in April this year, sealing deals (M&A and PE) worth $21 billion across 119 deals. Adding to the optimism, the MSME ministry is in talks with the Reserve Bank of India (RBI) to explore ways to improve credit flow to micro, small and medium enterprises across the country. The ministry is looking at measures to address issues pertaining to decline in exports. Additionally, a parliamentary panel headed by veteran BJP leader Murali Manohar Joshi has decided to study the recovery of black money and performance of public sector banks among a host of subjects. Finally, the BSE Sensex surged 289.52 points or 0.82% to 35,535.79, while the CNX Nifty was up by 89.95 points or 0.84% to 10,806.50.