Markets likely to make flat-to-negative start

Indian equity markets ended Friday’s session marginally in lower, on account of disappointing macroeconomic data. Today, the markets are likely to make flat-to-negative start, ahead of the release of crucial wholesale price index (WPI) inflation data later in the day coupled with more corporate earnings this week. There will be some cautiousness with the commerce ministry’s data showing that India’s trade deficit widened to its highest level in more than five years in June, driven largely by a surge in oil prices and a weaker rupee. The trade deficit widened to $16.6 billion from $14.62 billion in May, though merchandise exports rose 17.57% year-on-year in June, on account of healthy growth in sectors such as petroleum and chemicals, while imports rose 21.31% to $44.3 billion during the month. Also, there will be negative reaction on the Reserve Bank of India’s data that the country’s foreign exchange reserves declined by $248.20 million to $405.81 billion in the week to July 6, despite a rise in the foreign currency assets. Meanwhile, continuing their selling spree, foreign investors have pulled out nearly Rs 1,200 crore from the debt markets in the first two weeks of the month on higher fuel prices and possibilities of rate hike by the US Federal Reserve. However, traders may get some support later in the day with Economic Affairs Secretary Subhash Chandra Garg’s statement that the Indian economy is at a take off stage and is expected to be the world’s third largest by 2030 with GDP worth $10 trillion. Some support may also come with the Union Minister Arun Jaitley exuding confidence that India will pip Great Britain to become the fifth largest economy in the world next year if economic expansion continues at the projected rate. Meanwhile, Finance Minister Piyush Goyal has said that the Centre is looking at simplify the companies law to provide relief to businesses. There will be some buzz in public sector banks (PSBs) stocks with report that the finance ministry may approach markets regulator SEBI to seek relaxation on the minimum 25% public shareholding norm for some PSBs.

The US markets ended slightly higher on Friday, as traders seemed reluctant to make significant moves on the heels of the considerable volatility seen over the past few sessions. Asian markets were trading mostly in red in early deals on Monday, ahead of the release of a barrage of China economic data due later in the day.

Back home, snapping five days of winning streak, Indian equity benchmarks ended the Friday’s trade slightly in red terrain, as traders opted to book profit ahead of information technology (IT) heavyweight Infosys June quarter earnings. Markets started the session on an optimistic note with traders getting some encouragement from 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. Soon traders turned cautious on account of disappointing macroeconomic data. India’s retail inflation surged to five-month high of 5% in June 2018, for the third straight month, as compared to 4.87% in May, while India’s industrial production measured by Index of Industrial Production (IIP) declined to a seven-month low of 3.2% in the month of May 2018, as compared to a revised 4.8% growth in April. Some cautiousness also crept in with 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. Sentiments also remained pessimistic on report that the UK government's latest blueprint for Brexit released July 12 threatens to derail plans for closer trade ties with India as it would prevent Britain from making the kind of concessions on trade in goods. Anxiety also prevailed with Reserve Bank of India’s report stating that loan waivers have reduced burden on the farmers but there may be no visible benefits to the overall economy. Traders also took note of Niti Aayog vice chairman Rajiv Kumar’s statement that emergence of India as the sixth largest economy was very much expected but still there is a long way to go as the per capita income of the country is still low. Meanwhile, the government has set up a high-level task force under the chairmanship of Cabinet Secretary P K Sinha. The move assumes importance as India is highly dependent on imports of several items such as oil, electronic hardware, machinery, ingredients for pharmaceuticals, gold and chemicals. Finally, the BSE Sensex slipped 6.78 points or 0.02% to 36,541.63, while the CNX Nifty was down by 4.30 points or 0.04% to 11,018.90.