Markets to make cautious start amid mixed global cues

Snapping three-day winning streak, Indian markets ended lower on Thursday, after the US Federal Reserve lifted interest rates for the second time this year and signaled a more aggressive rate path for the rest of the year. Today, the markets are likely to make cautious start, tracking mixed global cues and a firmer dollar as the Trump administration readies tariffs on Chinese goods. Sentiments may remain dampen on private report that the record low equity risk premium and the gap between earnings yield and the bond yields are making it cautious on the Indian equity market. However, traders may get some solace later in the day with India’s Oil Minister Dharmendra Pradhan conveyed India’s concerns when he met ambassadors of OPEC countries in India over high international oil prices. Meanwhile, after implementing GST from July 1, 2017, the government had allowed use of stickers with revised rates, alongside the printed MRP for pre-packaged items to reflect changes in selling price for three months till September 30. The deadline has been extended several time and the latest was April 30. There will be buzz in stocks related to insurance sector with report that insurance regulator IRDAI is probing suspected illegal practices by some private sector insurers and their partner banks in bancassurance channels. Bancassurance refers to selling of insurance policies through banks, wherein these lenders earn revenue through such sales. Healthcare, private banks, technology, consumer and auto sector stocks may remain in focus on report that the reshuffle of the S&P BSE Sensex composition effective from June 18 will hit these sectors.

The US markets ended mostly higher on Thursday, after the European Central Bank said it would avoid raising interest rates until mid-2019, and data showed US economic strength. Asian markets were trading mostly in red on Friday as investors awaited developments on the trade front ahead of the expected unveiling of US tariffs targeting China.

Back home, Thursday turned-out to be a dismal day of trade for Indian equity benchmarks, where frontline gauges snapped their three days winning streak to end below their crucial  35,600 (Sensex) and 10,850 (Nifty) levels after the US Federal Reserve raised borrowing costs and struck a hawkish tone in its latest policy statement. Markets started the session on a pessimistic note with report showing 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 also remained concerned 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. Markets extended losses due to higher Wholesale Price Index (WPI) data. India’s wholesale inflation shot up to a 14-month high of 4.43 percent in May on increasing prices of petrol and diesel as well as vegetables. The WPI based inflation stood at 3.18 percent in April and 2.26 percent in May last year. Some anxiety also persist among investors with a private report stating that the Centre and some states strongly disagree on the inclusion of certain petroleum products -- natural gas and aviation turbine fuel -- under the ambit of Goods and Services Tax (GST). Sentiments also remained pessimistic with State Bank of India’s (SBI) latest report stating that India has only a decade to get into the developed country tag. However, markets managed to prune some of their losses in last leg of trade as market participants took some solace with report that Fitch Ratings raised 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 also get some relief with Commerce and industry minister Suresh Prabhu’s statement that India’s purchases of commercial aircraft and gas from the US would help bridge the trade deficit between the two countries even as they agreed to hold official talks soon to address trade and economic irritants between them. Finally, the BSE Sensex declined 139.34 points or 0.39% to 35,599.82, while the CNX Nifty was down by 48.65 points or 0.45% to 10,808.05.