Markets likely to make a cautious start

Indian equity markets ended higher with Sensex settling at the highest closing level of 36,548.41 mark, as sentiments got boost on expectations of strong corporate numbers coupled with renewed flows from foreign investors. Today, the markets are likely to make a cautious start amid weak macro-economic data. The Central Statistics Office’s (CSO) data highlighted that Retail inflation soared to five-month high of 5% in June compared to 4.87% in May, on the back of a depreciating rupee and skyrocketing fuel prices, while India’s Industrial Production (IIP) declined to a seven-month low of 3.2% in May as compared to 4.8% in April, mainly due to slow manufacturing activity and sluggish performance of power and FMCG sector. There will be some cautiousness with the Reserve Bank of India’s (RBI) statement that higher expenditure on salaries and farm loan waivers, coupled with a revenue shortfall on Goods and Services Tax (GST) implementation, led to a slippage of 0.35% in states’ fiscal targets to 3.1% in 2017-18. Traders will also be reacting to the Organisation for Economic Cooperation and Development’s (OECD) statement that big emerging economies like China and India will suffer more than developed countries if trade tariffs return to 1990 levels. However, traders will be getting some encouragement later in the day with Finance Minister Arun Jaitley’s statement that India could soon emerge as the world’s fifth largest economy if it continues to maintain its current pace of growth.

The US markets ended higher on Thursday, as Wall Street’s appetite for risk improved on signs China is willing to make concessions to avert a trade war. Asian markets were trading in green on Friday, as some relief coming from the lack of escalation in trade tensions between the US and China.

Back home, Extending jubilation for fifth straight session, Indian equity benchmarks ended the Thursday’s trade with a gain of three fourth of a percent, with Sensex hitting new lifetime high, while Nifty ending above its crucial 11,000 mark. The rally was mainly fuelled by a solid decline in crude prices, in fact, the most in two years. Markets made an optimistic start and traded jubilantly throughout the session, as sentiments remained up-beat with a report that India has become the world’s sixth largest economy overtaking France. According to World Bank data on gross domestic product (GDP) of countries for 2017, India’s gross domestic product (GDP) stood at $2.597 trillion at the end of 2017, compared to $2.582 trillion for France. Traders also got some encouragement with the International Labour Organization (ILO), an arm of the United Nations, report that if 40% of India’s electricity comes from renewables by 2030 (from 7.5% in February 2018), the country could add about 3 million new jobs. Adding to optimism, the estimated savings and gains since the inception of Aadhaar-based Direct Benefit Transfer (DBT) stood at over Rs 90,000 crore as on March 31 this year. However, traders booked some of their gains at higher levels in last leg of trade awaiting May industrial growth (IIP) data and June retail inflation (CPI) data due later in the day. Some concerns came with a private report stating that global debt rose to a record $247 trillion in the first quarter, more than $29 trillion higher than the end of 2016. Traders also took note of Chief Economic Adviser (CEA) Arvind Subramanian’s statement that a three-tier structure under new tax regime is possible as revenues stabilise. He also said that GST, India's biggest reform in indirect taxes still remains a work in progress and there is a need for further simplification of rates with fewer exemptions and simpler policies. Finally, the BSE Sensex soared 282.48 points or 0.78% to 36,548.41, while the CNX Nifty was up by 74.90 points or 0.68% to 11,023.20.