Markets likely to make pessimistic start

Indian markets ended Thursday’s session in red terrain, as investors remained on sidelines ahead of second quarter earnings season to be starting next week. Today, markets likely to make a pessimistic start amidst caution ahead of a US deadline to impose tariffs on Chinese imports later in the day. Traders may remain concern on private report that the increase in minimum support prices (MSP) by the government is set to bump up the Reserve Bank of India’s already heightened inflation forecast and will likely lead to higher interest rates at the next monetary policy review on August 1 and possibly another before the year ends. However, some support may come later in the day with private report that a lower base in the previous year’s quarter and likely good show by select companies in sectors such as automobiles, capital goods, FMCG, IT, and metals should help the Nifty 50 companies report a double-digit growth in aggregate sales and profits for the June 2018 quarter. Telecom stocks will be in focus after telecom regulator Trai prescribed amendments to the interconnect regulations, proposing certain changes in terms and conditions for an operator to seek fresh call connect ports from other telcos. There will be buzz in IT space on report that Nasscom chairman Rishad Premji and president Debjani Ghosh said US administrative measures on immigration have not had  a significant impact on Indian IT, and that the industry has adjusted by drastically reducing dependence on H-1B visas. Shares of all the three broadband service providers are likely to be in focus, after Reliance Industries Chairman Mukesh Ambani unveiled an ultra-high-speed fixed line fibre broadband for homes and enterprises across 1,100 cities on Thursday.

The US markets ended higher on Thursday, on easing trade concerns amid reports that President Donald Trump might suspend threats to impose tariffs on cars imported from Europe if duties on US cars are lifted. Asian markets were trading mostly in red on Friday, with investors bracing for developments on the trade front as markets awaited tariffs from the US and China to take effect later today.

Back home, Indian equity benchmark ended the choppy day of trade in red terrain on Thursday, with frontline gauges breaching their crucial 35,600 (Sensex) and 10,750 (Nifty) levels, as traders booked some of their gains from previous two sessions’ rally, ahead of June quarter earnings season to be starting next week. Traders remained cautious on report that the Securities and Exchange Board of India has issued a fresh show-cause notice to the National Stock Exchange and some of the key officials - including former CEOs Ravi Narain and Chitra Ramkrishna - on Wednesday, asking them to explain the allegations of preferential access to a few high-frequency traders and brokers to its trading platform. Traders also remained cautious with global credit rating agency, Moody’s Investors Services’ latest report that high oil price is the biggest risk to India’s Gross domestic product (GDP) growth. However, it also said that risks to sovereign credit dynamics from oil has lessened in recent years following subsidy reforms to petroleum and diesel fuel and only liquefied petroleum gas and kerosene oil remain subsidized. Selling in Reliance Industries too dampened sentiments post its 41st AGM. However, losses remained capped as traders got some solace with Union Minister Arun Jaitley’s statement that the government’s fiscal deficit target would not be breached on account of higher MSP for 14 crops as large provisioning for food subsidy has already been made in the Budget for current fiscal. Market participants also took some comfort with Niti Aayog’s Vice-Chairman, Rajiv Kumar’s statement that food and fuel are not contributing to the overall inflationary pressures in the economy. So this constant talk about inflationary pressures because of the MSP is quite misplaced. Traders also took note of Commerce and Industry Minister Suresh Prabhu’s statement that India’s exports are growing at a healthy rate and may record about 20% growth in June. However, these are challenging times for global trade as countries are taking protectionist measures. Finally, the BSE Sensex declined 70.85 points or 0.20% to 35,574.55, while the CNX Nifty was down by 20.15 points or 0.19% to 10,749.75.