Markets likely to make negative start

Indian equity markets ended lower on Monday, largely in tandem with a global market sell-off triggered by deteriorating trade relations between the US and China. Today, the start is likely to be in negative, as traders will be concerned about the Reserve Bank of India’s (RBI) report that Indian companies’ investments into their overseas subsidiaries/joint ventures fell by 63% to $1.17 billion in May this year. Traders will also be reacting to interim finance minister Piyush Goyal’s statement that creating infrastructure will need $4.5 trillion investments over the next decade and the cost of the money will be a challenge. Besides, as per a private report the RBI is expected to push key policy rates higher again in order to keep inflation in check. However, traders will be getting some support later in the trade with Employees’ Provident Fund Organisation’s (EPFO) payroll data showing that as many as 41.26 lakh new jobs were created in the eight months till April this year, with largest ever addition of 6.85 lakh in April alone. Meanwhile, the government has further extended the ban on import of milk and its products, including chocolates, from China for six months till December 23. There will be buzz in infrastructure related stocks with report that the Beijing-based Asian Infrastructure Investment Bank (AIIB) announced an equity investment of $100 million in India’s National Investment & Infrastructure Fund (NIIF) to help various development projects in the country.

The US markets ended sharply lower on Monday, as the latest jabs between the White House and Beijing exacerbated fears among investors of a full trade war. Asian markets were trading in red on Tuesday, as rising tensions between the US and other major countries especially China continued to weigh on markets sentiments.

Back home, Indian equity benchmark ended the Monday’s session on negative note, with Sensex and Nifty breaching their crucial 35,500 and 10,800 levels, respectively. After a cautious start, the key indices traded lackluster throughout the session, amid reports that foreign investors have pulled out over Rs 14,500 crore from the Indian capital markets in June so far, primarily due to global trade war and hawkish commentary by the US Federal Reserve. The latest outflow has taken the total net withdrawal by foreign portfolio investors (FPIs) from the capital markets (equity and debt) to more than Rs 46,600 crore in this year so far. The market participants remained worried with a private report stating that goods and services tax (GST) has not delivered on the promised formalisation of the economy as yet, while the glitches in the one-nation-one-tax regime has increased the demand for cash. Further, in the dying hours of the day, the markets extended their fall to close near day’s low point, on the back of heavy selling pressure coupled with weak global cues on worries over a US-China trade war. Adding some pessimism, Reserve Bank of India’s (RBI) data showed that India’s foreign exchange reserves fell by $3.03 billion to $410.070 billion as on June 15. Foreign currency assets, which form a key component of reserves, fell by $3.05 billion from the previous week to $385.333 billion. Traders paid no heed towards Confederation of Indian Industry’s (CII) statement that Indian companies’ overseas investments are likely to go up, with the stable market conditions and the significant impact created by Indian companies on local economies. The street also overlooked Union Minister Suresh Prabhu’s statement that India is trying to resolve trade disputes with several countries and is willing to create a new world trade order as it extends a hand of friendship to all. Finally, the BSE Sensex fell 219.25 points or 0.61% to 35,470.35, while the CNX Nifty was down by 59.40 points or 0.55% to 10,762.45.