Markets likely to make optimistic start

Indian equity benchmarks ended slightly lower on Friday as renewed trade war fears offset encouraging GDP data for the March quarter and news on the formation of a new government in Italy, the euro zone’s third-largest economy. Today, the markets are likely to make optimistic start amid firm global cues. Traders will get some encouragement with Prime Minister Narendra Modi’s statement that India’s economy will sustain a growth of 7.5 to 8 per cent per year. He said, the Indian government has kept its economic growth forecast for the current fiscal unchanged at 7.5 per cent, buoyed by turnaround in manufacturing and pick up in investment. Traders will be eyeing services sector data for May slated to be released on June 5, while the Reserve Bank’s rate decision will be announced on June 6. The RBI is expected to take a wait-and-watch approach despite the higher GDP growth figures released last week. However, there will be some concern with report that collections from the Goods and Services Tax in May fell to Rs 94,016 crore, from the Rs 1.03 lakh crore collected in April. Meanwhile, foreign investors pulled out a massive Rs 29,714 crore from the capital markets in May, making it the biggest outflow in 18 months, primarily due to a surge in global crude prices. There will be buzz in public sector banks on report that losses by state-run banks have almost entirely wiped out the $13-billion capital infusion by the government, and the situation is unlikely to improve in the current fiscal year.

The US markets ended higher on Friday following the release of a report from the Labor Department showing stronger than expected job growth in the month of May. Asian markets are trading mostly in green in early deals, tracking gains seen on Wall Street after Friday’s expectation-topping U.S. jobs report and shrugging off trade-related concerns.

Back home, Friday turned out to be a disappointing day of trade for Indian equity benchmarks, with frontline gauges ending the session with marginal losses, as better-than-expected Q4 GDP numbers failed to cheer Dalal Street. Indian economy grew at 7.7% during January-March quarter of financial year 2017-18 compared to 6.1% a year ago, driven by gains in manufacturing and consumer spending. However, the GDP growth for the entire fiscal of 2017-18 was at 6.7%, lower than 7.1% in 2016-17. Though, domestic gauges made a positive start as traders took some support with report that eight infrastructure industries recorded 4.7% growth in April helped by healthy performance in segments like coal, natural gas and cement. The growth rate of eight core sectors, which also include fertilisers and steel, was 2.6% in April 2017. Traders took some solace with Moody's Investors Service’s statement that tax reforms are likely to expand revenue base in fast growing economies like India but they will be most effective when accompanied by lowering of fiscal deficit and effective management of expenditure. However, frontline gauges pared all of their initial gains to enter into red terrain, as sentiments turned pessimistic with a report that activity in India’s manufacturing sector declined marginally in May on the back of weaker expansion in output, new order growth and employment. A buildup of inflationary pressures, amid persistent crude oil rally led to the input and output cost rising at the fastest pace since February, thereby impacting activity growth. The Nikkei India Manufacturing Purchasing Managers Index (PMI) fell from 51.6 in April to 51.2 in May. Sentiments also remained dampened on report that India’s per capita income grew at a slower pace of 8.6% to Rs 1,12,835 during the last fiscal ended March 2018. The per capita net national income in 2016-17 stood at Rs 1,03,870, witnessing a growth of over 10.3% from the preceding fiscal ended March 2016 (at Rs 94,130). Finally, the BSE Sensex declined 95.12 points or 0.27% to 35,227.26, while the CNX Nifty was down by 39.95 points or 0.37% to 10,696.20.