Markets likely to make optimistic start as oil prices tumble

Indian equity benchmarks edged higher for the second straight session on Friday as oil prices eased on expectations of a gradual increase in output from Russia and other large producers. Today, the markets are likely to make an optimistic start as oil extended a steep decline in the previous session, helping ease recent fears over inflation, current account and fiscal deficits. Traders will get some support with Industry chamber CII’s statement that businesses across several key sectors are seeing firm growth in sales and orders, indicating that the economy is on a recovery path and investments will pick up. CII said the impact of sustained structural reforms is now being felt on the ground as a mammoth economy is turning around. Some support will also come with CARE Ratings’ report stating the country’s industrial output is expected to log five to six per cent growth in this fiscal, bettering 4.3 per cent growth rate clocked in the previous fiscal. Adding to the optimism, a private report said India’s economy may have expanded by 7.1-7.5% in the January-March quarter - driven by manufacturing and construction - compared with 7.2% in the third quarter, independent experts said ahead of the release of official data next week. Meanwhile, the finance ministry is planning to set up a fund under the National Investment and Infrastructure Fund (NIIF) dedicated for strategic investments. However, there will be some concern on report that foreign investors have pulled out a massive $4 billion (over Rs 26,700 crore) from capital markets (equity and debt) so far this month, primarily due to surge in global crude prices. In April, they had pulled out more than Rs 15,500 crore, which was the steepest outflow in 16 months.

The US markets ended mostly lower on Friday, as investors kept an eye on geopolitical headlines. After President Donald Trump called off a June 12 summit with North Korea, a senior official from Pyongyang said its leader Kim Jong Un is still willing to meet. Asian markets were trading mixed in early deals, with the decline in oil prices weighing on energy stocks, while investors digested weekend news regarding US-North Korea relations.

Back home, extending previous session’s gains, Indian equity benchmarks ended the Friday’s trade in green terrain with frontline gauges recapturing their crucial 34,900 (Sensex) and 10,600 (Nifty) levels, as oil prices eased on expectations of a gradual increase in output from Russia and other large producers. Markets made an optimistic start and traded with traction throughout the day, as traders took encouragement with Care Ratings’ report forecasting the country’s GDP growth to accelerate to 7.5% this financial year, from 6.6% in the last fiscal, on better performance from the industrial and agricultural sectors. Headline inflation, lending rates, fiscal prudence, current account deficit (CAD) and exchange rates, however, are the areas of concern. Some support also came with NITI Aayog vice chairman Rajiv Kumar’s statement that states have the capacity and must reduce the duty on petrol, while the Centre should create fiscal space to deal with the impact of spurt in oil prices. The rising crude prices in the international market prompted state-owned oil companies to raise domestic prices for 11th day in a row. Petrol costs Rs 77.47 a litre in Delhi and diesel Rs 68.53 a litre. Key indices extended buying in last leg of trade as traders remained optimism after capital market regulator Securities and Exchange Board of India (SEBI) allowed ‘omnibus’ trades at the Gujarat International Finance Tec-city (GIFT City), India’s only international financial service centre (IFSC). An omnibus structure allows an investor trade through a broker or service provider with confidentiality. Meanwhile, Maharashtra Chief Minister Devendra Fadnavis has said that fuel prices will come down once the Centre builds a consensus to bring petrol and diesel under the Goods and Services Tax (GST). Finally, the BSE Sensex rose 261.76 points or 0.76% to 34,924.87, while the CNX Nifty was up by 91.30 points or 0.87% to 10,605.15.