Markets likely to make negative start on feeble global cues

Indian equity benchmarks ended higher for a third straight session on Wednesday, although markets ended off their day’s highs ahead of the Fed and ECB meetings. Today, the markets are likely to make pessimistic start amid feeble global cues. Sentiments will remain dampen on report that the country’s current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17. Traders will also remain concern on report that Reserve Bank of India to hike rates once again at its August monetary policy review as headline inflation surging to a four-month high of 4.87 per cent in May. However, traders will get some support later in the day with Fitch Ratings raising India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth. For 2019-20, it estimated the country to grow at 7.5 per cent. Traders will also get some solace with report that India will push for amicable solutions to trade disputes with the United States while hoping to address American concerns over market access and tariff levels during bilateral meetings between the two nations due soon. There will be buzz in telecom stocks after Communications Minister Manoj Sinha said that the new telecom policy is expected to be cleared by the Union Cabinet by the end of next month.

The US markets ended in red on Wednesday, as the Federal Reserve completed its second increase to benchmark interest rates in 2018, as expected, but signaled a slightly more aggressive plan to tighten monetary policy this year than had previously been projected. Asian markets trading lower after the Fed raised interest rates and took a more hawkish tone in forecasting a slightly faster pace of tightening for the rest of the year, while concerns about US-China trade frictions kept investors on edge.

Back home, paring most of their early gains, Indian equity benchmarks ended the Wednesday’s trade with marginal gains as investors digested macro-economic data and looked ahead to the Fed and ECB meetings for direction. Markets started the session on an optimistic note boosted by good industrial production data for April. India’s industrial production grew 4.9 percent in April, as compared with 4.4 percent in March. The factory output index growth rate moderated in March after consistently being above 7 percent between November and February. It expanded 6 percent a year ago. Some support came with markets regulator Sebi’s proposal to allow direct listing of Indian companies on overseas bourses and of foreign firms on Indian exchanges, while setting up an expert panel to look into the details. Currently, Indian companies can list their shares through depository receipts abroad, while foreign companies need to go through the Indian Depository Receipt route for listing of equities. Some support also came with a report that the Central Board of Indirect Taxes and Customs (CBIC) has extended the refund fortnight for fast track clearance of pending dues to exporters by two days till June 16. However, market participants pared most of their early gains in last leg of trade to end slightly higher ahead of the wholesale price index (WPI) inflation data will be announced on June 14, 2018. Traders also remained on sidelines ahead of the outcome of US Federal Reserve’s two-day policy meeting concludes on June 13 and the European Central Bank (ECB) policy meeting to be held on June 14, 2018. Anxiety also spread among the investors, as industry body CII warned that rate hike by the Reserve Bank will increase the cost of doing business and impact capital expenditure by India Inc. Sentiments also weighed down on report that that India’s retail inflation hit a four-month high after jumping to 4.87 percent in May from April’s 4.58 percent driven by costlier food and fuel. Retail inflation, measured by Consumer Price Index (CPI), had fallen to 2.18 percent in May 2017. Finally, the BSE Sensex gained 46.64 points or 0.13% to 35,739.16, while the CNX Nifty was up by 13.85 points or 0.13% to 10,856.70.