Markets to make flat-to-cautious start

Indian shares ended a lackluster session flat on Monday as weak industrial output data disappointed investors and caution set in ahead of Karnataka election results. Today, the markets are likely to make a flat-to-cautious as investors will keep an eye on the Karnataka assembly election results. Early trends suggest the likelihood of a hung assembly with no party landing close to the halfway mark. Traders will also remain concern on report that India’s Retail inflation, measured by the consumer price index (CPI) rose to 4.58% in April 2018 as compared to 4.28% in March 2018, while rural inflation increased to 4.67% and urban inflation surged to 4.42% in April 2018. However, CPI food inflation for April eased marginally to 2.80% versus 2.81% in last month. Meanwhile, NITI Aayog CEO Amitabh Kant said India needs to grow at about 10 per cent annually for the next three decades to be able to meet the ever-rising demands of its growing population. Investors may get some support later in the day with private report stating that the Reserve Bank of India is expected to begin its rate hike cycle from December quarter, and may go for three rate hikes by 2019 taking the key policy rate to 6.75 per cent. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended higher on Monday amid easing trade tensions ahead of a second round of trade talks between the U.S. and China this week. Asian shares were trading mostly in red as investors remained focused on U.S.-China trade ties ahead of second round of negotiations expected this week.

Back home, Indian equity benchmarks ended the volatile day of trade with modest gains on Monday, as traders remained on sidelines ahead of Karnataka election results due on May 15. Markets started the session on an optimistic note as traders took some encouragement with Fitch’s report stating that India’s economic growth will accelerate to 7.3% in the current fiscal and 7.5% in the next as money supply has recovered to its pre-demonetisation level and disruptions related to the rollout of GST have diminished. Separately, another foreign brokerage report highlighted that despite moderation in factory output growth in March, India’s GDP is expected to grow by 7.7% in January-March, up from 7.2% in the preceding quarter. Some support also came from a report which highlighted that the Finance Ministry has cleared FDI proposal last month which will bring total foreign investment worth Rs 3,250 crore. However, markets took U-turn and entered into red terrain after India’s wholesale inflation grew 3.18% in April hitting a 4-month high as prices of some vegetables and fuel & power firmed up. Wholesale Price Index (WPI) witnessed a growth of 2.47% in March and 3.85% April 2017. Primary articles, which accounts for more than a fifth of the entire wholesale price index, grew 1.41% in April from 1.03% year a percent ago and 0.24% in March. Sentiments also remained dampened on report that Industrial output grew by 4.4% 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% from 4.6% in the previous fiscal. But, recovery in final hour of trade helped markets to end slightly in green, supported by a private report stating that India was the largest remittance-receiving country in the world, with migrant workers from the country sending home $69 billion in 2017. Finally, the BSE Sensex gained 20.92 points or 0.06% to 35,556.71, while the CNX Nifty was up by 0.10 points to 10,806.60.