Markets to make slightly positive start

Indian equity markets ended lower on Monday amid weak trend across Asia and Europe as Germany faced political crisis over immigration. Today, markets likely to make flat-to-positive start, though the undertone is likely to remain cautious ahead of the July 6 deadline when the United States is due to impose the tariffs on Chinese exports. Traders may get some support with Finance Minister Piyush Goyal’s statement that India will be able to restrict the fiscal deficit below the budgeted level of 3.3 per cent of GDP in 2018-19, which has hit 55 per cent of the annual target in the first two months of the financial year. Traders may also get some boost with Commerce Minister Suresh Prabhu’s statement that early data indicate that exports have registered a good performance in June despite volatility in global markets. Market participants may also get some respite with, retail inflation for industrial workers remained flat at 3.96 per cent in May compared to 3.97 per cent in April this year. Meanwhile, India has agreed to provide tariff concessions on 3,142 products to the six member nations of the Asia Pacific Trade Agreement (APTA) effective from July 1. However, there will be some cautiousness on report that growth in output of the crucial eight core industries declined to a 10-month low of 3.6 per cent in May due to a fall in the pace of growth of steel, cement as well as contraction in crude and natural gas. This might have an adverse impact on the index of industrial production (IIP) as core industries have 40 per cent weightage in the index.

The US markets ended higher on Monday following the release of a report from the Institute for Supply management showing growth in U.S. manufacturing activity unexpectedly accelerated in the month of June. Asian markets were trading mostly in red on Tuesday, with greater China markets extending their declines as investor worries over Beijing’s trade relations with the U.S. soured sentiment in the region.

Back home, Indian equity benchmarks reversed half of their previous session’s gains to end lower by around half a percent on Monday, as traders remained concerned on trade worries and political uncertainty in Germany. Markets made a cautious start and turned negative with report of the Reserve Bank of India stating 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. Sentiments also remained dampened with India’s foreign direct investment (FDI) growth rate hitting five-year low of 3% at in 2017-18. Markets extended losses to hit intraday lows in noon deals as sentiments weighed on reports that India’s fiscal deficit has exceeded 55% of the Budget estimate in just first two months (April-May) of the current Year (FY19), though it is still lower than what was recorded in the same period last fiscal. According to the Controller General of Accounts (CGA) data, fiscal deficit during the same period of the previous financial year had stood at 68.3%. The selling got intensified and markets even went to test their psychological 35,100 (Sensex) and 10,600 (Nifty), but key gauges got strong support near those levels and managed to prune some of their losses to end off day lows. Traders got some relief with the country’s manufacturing sector activity in June, which grew at the strongest pace this year, supported by rise in domestic and export orders. The Nikkei India Manufacturing Purchasing Managers Index (PMI) rose from 51.2 in May to 53.1 in June, registering the fastest improvement since December 2017. Some solace also came with Finance Secretary Hasmukh Adhia’s statement that the revenue collection under the Goods and Services Tax (GST) during the month of June 2018 increased to Rs 95,610 crore, as compared to previous month’s revenue of Rs 94,016 crore. Finally, the BSE Sensex declined 159.07 points or 0.45% to 35,264.41, while the CNX Nifty was down by 57.00 points or 0.53% to 10,657.30.