Markets likely to make cautious start on weak regional cues

Indian equity benchmarks ended lower on Monday as concerns over rising oil prices, a fractured mandate in Karnataka and renewed selling by foreign funds. Today, the markets are likely to make cautious start amid weak cues from Asian counters. Traders will remain concern on report that rising oil prices may not prompt the RBI Governor-headed Monetary Policy Committee (MPC) to go for a rate hike in its June meeting but it can widen the Current Account Deficit (CAD) to 2.5 per cent of the Gross Domestic Product (GDP). However, traders will get some relief later in the day with ICRA’s report that GDP growth in January-March 2017-18 at 7.4 per cent on account of good rabi crop harvest and improved corporate earnings, up from 7.2 per cent in the third quarter. The Central Statistics Office (CSO) is scheduled to come out with GDP estimate for the fourth quarter (Q4) of fiscal 2017-18 and provisional annual estimates for the year 2017-18 on May 31. Some support may come with NITI Aayog’s vice-chairman Rajiv Kumar exuding confidence that Indian economy will achieve 9 per cent growth rate on sustained basis by 2022 on the back of reforms like GST, demonetisation and the Insolvency and Bankruptcy Code (IBC). There will be buzz in Gems and jewellery related stocks on report that India's gems and jewellery exports have declined 22 per cent to $2.6 billion in April on account of demand slowdown in major markets including the UAE.

The US markets ended higher on Monday amid optimism about a positive outcome from trade talks between the U.S. and China. However, Asian stocks are trading mostly lower in thin trade amid holidays in Hong Kong and South Korea. The dollar hovered near four-month highs on renewed optimism about global growth while oil prices held steady after hitting their highest levels in three and a half years overnight on concerns over U.S. sanctions targeting Venezuela.

Back home, extending their losing streak for fifth straight day, Indian equity benchmarks ended the Monday’s trade with a cut of over half a percent, with frontline gauges ending below their crucial 34,700 (Sensex) and 10,550 (Nifty) levels, as Karnataka elections is weighing on the markets as the outlook of the 2019 election is looking obfuscate. Markets started the session slightly in green as traders took some support with economic affairs secretary Subhash Chandra Garg’s statement that India’s growth trajectory continues to be stable with strong macroeconomic fundamentals, despite a continual rise in global oil prices and hardening bond yields. He also said that the fiscal deficit programme has been going on very smoothly and there has been no reason to believe that there will be any greater impact. Traders also got some support with report that India is the sixth wealthiest country in the world with a total wealth of $8,230 billion, while the US is the richest nation globally. However, markets failed to hold on to the green terrain and slipped into red on report that even as monsoon is predicted to be normal this year, its uneven distribution could spike food prices, and inflation is likely to edge further. Sentiments also remained dampened with a private report stating that Corporate India, especially the chunk comprising over-leveraged companies, is worried about a recent Reserve Bank of India (RBI) circular that says companies with even a day of loan-default can be set on the path of debt resolution and subsequent bankruptcy proceedings. Markets extended losses to end near intraday lows with the Comptroller and Auditor General (CAG) of India Rajiv Mehrishi’s statement that the root cause of Indian banking sector crisis is the problem in the bond market as the RBI acts as regulator as well as trader. He noted that the RBI, in its effort to ensure that banks don’t fail, has slowed down giving licences to new banks, so it promotes uncompetitive behavior. Adding to the pessimism, Niti Aayog CEO Amitabh Kant said that achieving 9-10% growth rate in the next 30 years would be a challenge for India, even though the country is expanding at 7.5% growth rate per annum. Finally, the BSE Sensex declined 232.17 points or 0.67% to 34,616.13, while the CNX Nifty was down by 79.70 points or 0.75% to 10,516.70.