Markets likely to make slightly negative start

Indian equity benchmarks ended Tuesday’s trading session in the green, as investors overlooked lingering trade tensions in Asia ahead of the deadline for imposition of tariffs by the US on China. Today, the start is likely to be slightly negative, amid weak global cues. Traders will also be eyeing services sector data for June slated to be released later in the day. Traders will be concern with the rating agency ICRA’s report that Reserve Bank of India’s (RBI) plan to change disbursement norms of working capital would exert pressure on the liquidity profile of borrowers, specifically those having a high dependence on cash credit or overdraft facilities while lacking alternative sources of liquidity. There may be some cautiousness with a report that the five-pronged strategy recommended by the panel of bankers for resolution of bad loans is a useful long-term concept, but tighter deadlines and near-term funding challenges remain. However, investors may get some support later in the day with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the Indian economy is on the cusp of a major sustained and ongoing recovery and poised to grow above 8% from the next year, thanks to a slew of measures taken by the government in the last few years. Meanwhile, the government will change the base year for calculation of GDP and retail inflation to 2017-18 and 2018 respectively, which is likely to come to effect by 2019-20. Besides, the Centre will announce new Minimum Support Price (MSP) of all Kharif (summer-sown) crops for the 2018-19 marketing season. There will be buzz in coal sector stocks with a private report that coal imports in the first two months of the ongoing fiscal registered a marginal decline of 2.6% at 36.49 million tonnes (MT).

The US markets ended a holiday-shortened session in negative territory on Tuesday, amid lingering trade concerns as tariffs on billions of dollars worth of US and Chinese goods are set to take effect later this week. Trading volumes were lower than normal as markets closed at 1 pm ahead of Independence Day. Asian markets were trading mostly in red on Wednesday, with Japanese markets lagging other Asian majors as trade jitters continued to simmer ahead of a deadline when tariffs are due to take effect.

Back home, recouping some of their previous session’s losses, Indian equity benchmarks ended the Tuesday’s trade in green terrain with frontline gauges ending just shy of their crucial 10,700 (Nifty) and 35,400 (Sensex) levels. Markets soon after a flat start gained momentum and traded with traction during the day as traders took some encouragement 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% of the annual target in the first two months of the financial year. Traders also took some support 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. Some support also came with report highlighting that a widespread makeover is being witnessed in the Indian economy especially on the poverty reduction front as goods and services tax (GST) completes one year since its introduction last year. Adding to the sanguinity, the commerce ministry stated that 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 01. The markets took note of the Labour Ministry’s statement that retail inflation for industrial workers remained flat at 3.96% in May compared to 3.97% in April this year. The food inflation based on CPI-IW stood at 1.66% in May against 1.33% in the previous month. However, gains remained capped up to certain levels as traders remained concerned over ongoing trade tensions between world’s largest economies US and China. Meanwhile, growth in output of the crucial eight core industries declined to a 10-month low of 3.6% 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% weightage in the index. Finally, the BSE Sensex rose 114.19 points or 0.32% to 35,378.60, while the CNX Nifty was up by 42.60 points or 0.40% to 10,699.90.