Markets likely to make cautious start on mixed global cues

Indian equity markets rallied on Friday, as the July derivatives contracts kicked off on a strong note coupled with a firming trend at other Asian markets amid recovery in the rupee supported the markets. Today, the start is likely to remain cautious, as traders will be concern about a report that foreign direct investment (FDI) in India seems to be petering out with the inflows growth rate recording a five-year low of 3% at $44.85 billion in 2017-18. Also, there will be negative reaction on India’s budgetary fiscal deficit for April-May 2018-19 stood at 55.3% -- Rs 3.45 lakh crore -- of the full year’s target of Rs 6.24 lakh crore. Besides, the Reserve Bank of india in latest report stated that India’s external debt stood at $529.7 billion at the end of March 2018, recording an increase of $58.4 billion year-on-year, primarily on account of a rise in commercial borrowings, short-term debt and non-resident Indian (NRI) deposits. Meanwhile, revenue collection from Goods and Services Tax (GST) rose to Rs 95,610 lakh crore in June, as compared with Rs 94,016 crore a month ago. There will be buzz in steel sector stocks, with Union Steel Minister Chaudhary Birender Singh’s statement that the US’ levy of heavy tariffs on imported steel and aluminum would not have any major impact on steel production in India as steel export to US was only 3.3% of total exports. Also, there will be buzz in banking sector stocks with report that the Finance Ministry is dusting off merger proposals of public sector banks and has started weighing various options to create few more banks of the size of State Bank of India. Besides, the auto sector stocks will also be in action, reacting to their monthly sales numbers.

The US markets ended higher on Friday, after announcing buybacks and dividend hikes following the Federal Reserve’s annual stress test. Asian markets were trading mixed on Monday, with trade tensions between the US and its trading partners still a key concern for investors.

Back home, Snapping two-day losing streak, Indian equity benchmarks ended Friday’s session on optimistic note, with key gauges recapturing there crucial 35,400 (Sensex) and 10,700 (Nifty) levels, amid firm global markets. The bourses started the session in green with the International Monetary Fund (IMF) suggesting steps to sustain the high growth rate which India has achieved. It said that the country should carry out banking sector reforms; continue with fiscal consolidation, simplify and streamline GST; and renew impetus on reforms. Investors took some encouragement with Economic Affairs Secretary Subhash Chandra Garg’s statement that India has adequate ‘firepower’ of foreign exchange reserves to deal with the current volatility in the rupee. Some support also came with Secretary of the Department of Expenditure under Finance Ministry Ajay Narayan Jha’s statement that the fiscal deficit, which is the difference between total revenue and expenditure, for the current financial year (FY19), will be maintained at 3.3% of the gross domestic product (GDP) and the fiscal consolidation of the country is as per the ‘commitment’. In the second half of the session, the key indices rallied further to reach near their intraday high points, on the back of fresh buying by funds and retail investors. The markets participants took support with a private report stating that the second quarter of calendar year 2018 saw the biggest ever private equity (PE) investments in India. The PE firms have invested a record $8.2 billion during the quarter ended June 2018, an increase of 60% compared with $5.1 billion in the same period last year. The street paid no heed towards the World Bank’s latest report stating that the India may see 2.8% fall in GDP by 2050, amid rising temperatures and changing monsoon rainfall patterns from climate change. Investors even overlooked Finance Minister Piyush Goyal’s statement that strong action would be taken against illicit Swiss deposits. He further noted that India would start getting details of bank accounts from Switzerland under a bilateral treaty. Meanwhile, the fiscal deficit for the first two months of the current fiscal FY19 stood at 55.3% or Rs 3.455 lakh crore of the budgeted target of Rs 6.243 lakh crore. Finally, the BSE Sensex rose 385.84 points or 1.10% to 35,423.48, while the CNX Nifty was up by 125.20 points or 1.18% to 10,714.30.