Markets to make optimistic start

Indian equity markets ended lower after record rally in early trade on Wednesday, due to sustained selling in metal, auto and telecom stocks amid reports that the Modi government will face a no-trust vote on Friday. Today, the start is likely to be in green, following firm global cues. Traders may take note of a recent ASSOCHAM-Ashvin Parekh Advisory Services LLP (APAS) joint study stating that a developed corporate bond market is the need of the hour for India as an 8% economic growth cannot be achieved without a robust corporate capex cycle, more so as sole reliance on bank loans is not warranted, particularly when bank lending has been squeezed. Besides, retirement fund body The Employees' Provident Fund Organisation (EPFO) has invested Rs 489.46 billion in exchange-traded funds (ETFs) till June 30, 2018. Meanwhile, the government has initiated as many as 214 anti-dumping investigations up to December last year against China, with which India has a huge trade deficit. The trade deficit (difference between imports and exports) with China has increased to $63.12 billion in 2017-18 from $51 billion in the previous fiscal. There will be buzz in sugar sector related stocks with report that the government has decided to increase the minimum price sugar mills pay to cane growers by Rs 20 per quintal to Rs 275 per quintal for the next marketing year starting October. There will be buzz in PSU banking stocks with report that after approving capital support for five public sector banks (PSBs), the finance ministry is assessing the needs of 2-3 more banks and fund infusion in them would be done by the end of the second quarter of the current fiscal. There will be buzz in airline industry stocks with ICRA’s latest report that the domestic airline industry is expected to post losses to the tune of Rs 3,600 crore in the current fiscal on rise in crude oil prices and falling rupee. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets ended mostly higher on Wednesday, as the anecdotal account of business conditions in the Fed’s 12 districts showed that 11 regions of the country were growing at a modest pace or even faster. Asian markets were trading in green on Thursday, taking cues from Wall Street’s overnight advance as investors there parsed through stronger-than-expected corporate earnings.

Back home, Wednesday turned out to be a disappointing day of trade for Indian equity benchmarks, with frontline gauges settling below their crucial 11,000 (Nifty) and 36,400 (Sensex) levels, as traders opted to book profit in second half of trade after the opposition parties tabled a no-confidence motion against Prime Minister Narendra Modi’s government. Markets started the session on an optimistic note with Confederation of Indian Industry’s (CII) president Rakesh Bharti Mittal’s statement that GDP growth at 7.5% plus was a very healthy and positive sign for Indian economy, noting that impact of sustained structural reforms is now being felt on the ground. Traders also took some support with a private report that inflation based on wholesale prices, which touched a 4-year high in June, seems to have peaked for this financial year, and is expected to glide down to around 4.1% by March 2019. Traders also got some confidence with the International Monetary Fund (IMF) saying that India’s Gross Domestic Product (GDP) growth remains quite robust into the future, despite marginally trimming the country’s growth projection for 2018 due to high oil prices and a tight monetary policy regime. However, markets took U-turn and entered into red terrain in second half of the day’s trade after Lok Sabha Speaker Sumitra Mahajan accepted the no-confidence motion moved against the BJP Government on the first day of the Monsoon Session that began in Parliament on Wednesday. Some anxiety was also among the local traders with report that India’s import bill of crude oil and petroleum products swelled 57% to $12.73 billion in June as compared to the same month last year. In the sectoral landscape, all the indices except Oil & Gas and Energy were trading in the red. Traders also remained concerned with a private study report pointing out discrepancies in FDI data and also suggested that the RBI should regenerate foreign fund inflows and outflows data with detailed information at least for the past five years with a view to providing a more realistic picture of overseas investments. Finally, the BSE Sensex declined 146.52 points or 0.40% to 36,373.44, while the CNX Nifty was down by 27.60 points or 0.25% to 10,980.45.