Markets to make flat-to-positive start on Thursday

Indian equity benchmarks ended Wednesday’s session lower amid uncertainty over the composition of the next government in Karnataka. Today, the markets are likely to make flat-to-positive start amid mixed global cues. Traders will get some support from report that the Centre has contained its fiscal deficit for FY18 at 3.42% of gross domestic product (GDP), down from 3.5% estimated (RE) when Budget FY19 was presented on February 1. An Rs 85,000 crore (3.8%) reduction in expenditure from the RE level of Rs 22.18 lakh crore and a marginal upward revision in nominal GDP in the second advance estimate (the Budget relied on the first advance estimate) allowed the government to curb the deficit. However, traders will remain little concern on report that total investments via participatory notes (P-notes) into Indian capital markets plunged to a 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the Securities and Exchange Board of India to check the misuse of these instruments. There will be buzz in public sector undertakings (PSU) related stocks after the Cabinet approved a mechanism within the government for speedy resolution of commercial disputes of central public sector enterprises without cases going to courts. A new two-tier mechanism will be put in place of the existing Permanent Machinery of Arbitration mechanism to resolve such commercial disputes. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended higher on Wednesday, as investors shrugged off geopolitical uncertainty after North Korea threatened to cancel an historic meeting between leader Kim Jong Un and President Donald Trump. Asian markets are exhibiting mixed trend in early deals on Thursday. However, the Japanese stock market edged higher as investors shrugged off weak Japanese core machinery orders data for March.

Back home, Indian equity benchmarks ended the Wednesday’s session with a cut of around half a percent with frontline gauges breaching their crucial 35,400 (Sensex) and 10,750 (Nifty) levels, amid uncertainty over government formation in Karnataka. Markets started the session on subdued note as sentiments remained downbeat on report that India’s trade deficit slightly widened to $13.72 billion in April from $13.25 billion a year ago. Exports grew by 5.17% to $25.91 billion in April compared to the same month last year on account of healthy performance by engineering, chemicals and pharmaceutical segments. Imports too grew by 4.60% to $39.63 billion in the month on yearly basis. Traders also reacted negatively to a private report which stated that inflation is set to rise further towards the second half of the fiscal, and could average 5.1% this financial year compared to 3.6% last year. According to the global financial services major, the factors that are likely to impact inflation going forward include higher oil prices, a weaker rupee, higher MSPs and more currency in circulation. Though, markets trimmed most of their losses in second half of the session as traders took some solace with media reports that Yeddyurappa was elected as BJP legislature party head and Karnataka governor may invite BJP to form the government. Meanwhile, in a bid to promote growth of the global economy, Commerce and Industry Minister Suresh Prabhu has pitched for inclusion of a comprehensive trade facilitation agreement (TFA) on services in the World Trade Organization (WTO). However, the recovery was not enough to bring markets back in green and selling in dying hour of trade dragged markets below their respective crucial levels as traders turned pessimistic on report that the total investment via Participatory notes (P-notes) into Indian capital markets plunged to nearly 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the regulator SEBI to check misuse of these instruments. Finally, the BSE Sensex shed 156.06 points or 0.44% to 35,387.88, while the CNX Nifty was down by 60.75 points or 0.56% to 10,741.10.