Markets to start slightly in green on Friday

Indian equity benchmarks ended lower on Thursday after BJP’s Yeddyurappa has been given 15 days to prove the party has a legislative majority in Karnataka. Today, the markets are likely to make flat-to-positive start as traders will get some support with UN’s report that India’s economy is projected to grow 7.6% in fiscal year 2018-19, remaining the fastest growing economy in the world, as robust private consumption and benefits from past reforms help the country’s GDP gain momentum but sustained recovery in private investment remains a crucial challenge. Some support will also come with Niti Aayog CEO Amitabh Kant’s statement that crony capitalism in India will come to an end with the new bankruptcy code though it was facing some teething troubles. However, there will be some concern on private report stating that Reserve Bank of India is likely to keep policy rates unchanged in the forthcoming monetary policy review, but will have a hawkish tone on concerns over inflation and as crude oil prices remain elevated. The Reserve Bank will announce its second bi-monthly monetary policy on June 6. There will be buzz in Aviation related stocks on reports that the Civil Aviation Ministry is likely to approach the GST Council soon for bringing aviation turbine fuel (ATF) under the tax regime. Currently, jet fuel or ATF is not under the GST ambit and the levy on it varies from state to state. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets ended lower on Thursday, as traders expressed some uncertainty about the second round of trade talks between the U.S. and China. Asian markets are exhibiting mixed trend in early deals on Friday, as investors appeared to be readjusting their expectations about trade negotiations between the U.S. and China.

Back home, extending losing streak for third straight day, Indian equity benchmarks ended the Thursday’s trade in red terrain with a cut of over half a percent, with frontline gauges breaching their crucial 10,700 (Nifty) and 35,200 (Sensex) levels, as doubts whether the Bharatiya Janata Party (BJP) could prove its majority in the southern state of Karnataka weighed on investor sentiment. State BJP president B S Yeddyurappa was sworn in as chief minister on Thursday morning even though his party fell short of an outright majority. He has now 15 days to prove his majority in the state legislative assembly. Markets started the session slightly in green terrain on 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. Key gauges pared all of their initial gains and entered into red terrain 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. Investors shrugged off private report that there was a 23% jump in venture investments in April at $2.4 billion, led by e-commerce, infrastructure and realty plays by funds. The report added that the increase in activity was driven largely by a jump in deal sizes, it said, pointing out that going by the number of deals, there were 69 transactions this April as against 66 in the year-ago period. Selling got intensified in last leg of trade to drag benchmarks below their respective crucial levels. Finally, the BSE Sensex declined 238.76 points or 0.67% to 35,149.12, while the CNX Nifty was down by 58.40 points or 0.54% to 10,682.70.