Markets likely to make flat-to-negative start

Indian equity benchmarks ended Tuesday’s range-bound session with marginal gains, following mixed global cues. Today, the markets are likely to make flat-to-negative start on penultimate session of F&O expiry. Traders will be concern over the Reserve Bank of India (RBI) calling for greater vigilance on the domestic macro-economic front saying conditions, which pushed Gross Domestic Product (GDP) growth to 7.7% in March 2018 quarter, are changing and warned that bad loan situation might worsen. There will be some cautiousness with a report that government debt rose 1.7% to over Rs 76.94 lakh crore in the January-March period of 2017-18 fiscal over the previous quarter. The debt was Rs 75.66 lakh crore as of December 2017.  However, some respite may come later in the trade with the government expecting a tremendous improvement in tax buoyancy from the goods and services tax (GST) and, ahead of its first anniversary, expect collections from the landmark levy to average more than Rs 1 lakh crore a month in this fiscal year. Meanwhile, the government has said natural gas and jet fuel (ATF) are natural and easier candidates for inclusion in the indirect tax regime. There will be some buzz in the cement sector stocks with ICRA’s report that domestic cement production is expected to grow at 6% this fiscal, however, rising input costs are likely to put pressure on the operating profitability of cement companies in the coming quarters. Also, there will be buzz in banking sector stocks with the RBI’s latest report stating that the gross non-performing assets (GNPAs), or bad loans, ratio in the Indian banking system is likely to rise from 11.6% in March 2018 to 12.2% by the end of March next year.

The US markets ended higher on Tuesday, as a rally in American crude overshadowed lingering concerns about the impact of heightened trade tensions. Asian markets are trading mixed on Wednesday, as concerns lingered over the impact of potential global trade restrictions.

Back home, Indian equity benchmarks pared their gains to end flat on Tuesday, ahead of the June F&O expiry due on June 28. Markets started the session on a negative note but managed to trade in green terrain for the most part of the trade, supported by finance ministry’s statement that it has simplified the process of granting additional borrowing limits to the states, keeping in view the government’s policy for cooperative federalism. Some support also came with Employees’ Provident Fund Organisation’s (EPFO) payroll data 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. The street also got comfort with MSME secretary A K Panda’s statement that the credit guarantee to the micro and small enterprises (MSEs) sector will double to over Rs 40,000 crore this fiscal under the Credit Guarantee Fund Trust for MSE. Adding some optimism, Prime Minister Narendra Modi said that the rising crude prices have not resulted in a spike in inflation and the macroeconomic fundamentals of the country remain strong. Some relief also came with a report noting that a significant percentage of the country’s chief financial officers believe that GST had a positive impact on the overall business climate. Further, markets touched their intraday highs in late afternoon session, but a selloff in the last leg of trade lead benchmarks to end near neutral lines. Traders got cautious with report that the share of foreign portfolio investments (FPIs) in domestic capital markets through participatory notes (P-notes) slipped over 9-year low of more than Rs 93,000 crore at the end of May, amid stringent norms put in place by SEBI to check the misuse of these instruments. Domestic sentiments also got hit with the Reserve Bank of India’s (RBI’s) data report that Indian companies’ investments into their overseas subsidiaries/joint ventures have dropped by 63% to $1.17 billion in May 2018 as compared to $3.12 billion in May 2017. Investors took note of a private report that the RBI is expected to push key policy rates higher again in order to keep inflation in check. Finally, the BSE Sensex gained 19.69 points or 0.06% to 35,490.04, while the CNX Nifty was up by 6.70 points or 0.06% to 10,769.15.