Markets to make cautious start

Indian equity benchmarks ended Thursday’s session with marginal losses, tacking weak trade in Asian counterparts. Today, the markets are likely to make cautious start ahead of voting on a no-trust motion against the NDA government. The parliament will debate a no-confidence motion tabled by opposition parties against the Prime Minister Narendra Modi’s government, the first day of the monsoon session. Investors will also be looking ahead the Goods and Services Tax (GST) Council meeting to be held on July 21, where it will consider to cut tax rate on 30-40 items across multiple slabs. There will be some cautiousness with ICRA’s report that India’s current account deficit (CAD) is set to widen and the first quarter print may come in at $16-17 billion or 2.5% of Gross Domestic Product (GDP) and added that for the full year the gap may scale a six-year high of $67-72 billion. Traders will also be reacting to Commerce Secretary Rita Teaotia’s statement that there was a real possibility that India could lose the trade dispute that the US had filed in the World Trade Organization (WTO) on export subsidies. She said this was because income levels in India had crossed the threshold for exports to be subsidised. However, traders may take some support later in the day with Asian Development Bank’s (ADB) new report that South Asia continues to be the fastest growing sub-region, led by India, whose economy is on track to meet fiscal year 2018 projected growth of 7.3% and further accelerating to 7.6% in 2019, as measures taken to strengthen the banking system and tax reform boost investment. There will be some support with industry body Ficci’s statement that despite short-term challenges, India’s economic growth story remains intact and the country’s GDP is expected to grow around 7.5% in the current financial year.  There will be some important earnings announcements too to keep the markets buzzing.

The US markets ended lower on Thursday, as a deal to toughen foreign-investment reviews stoked trade tensions and a round of lukewarm corporate-earnings reports weighed on sentiment. Asian markets were trading mixed on Friday, as investor caution prevailed amid concerns about the European Union imposing retaliatory tariffs on US goods, while US President Donald Trump’s criticism of Federal Reserve policy knocked the dollar.

Back home, Indian equity benchmarks ended the choppy day of trade slightly in red terrain on Thursday, as investors remained watchful for developments in the Parliament on Thursday after the opposition parties tabled a no-confidence motion against Prime Minister Narendra Modi’s government. Markets after a positive start turned flat and traded choppy in green and red terrain throughout the day. Sentiments remained downbeat with new World Bank’s study report stating that the government’s demonetisation during the third quarter of 2016-17 took away up to 7.3 percentage points of growth in the country’s Gross Domestic Product (GDP) for that period only, in districts dominated by informal activities. Traders took 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. However, losses remained capped with as some solace also came with the Asian Development Bank’s (ADB) latest report stating that Indian economy is on track to meet fiscal year 2018 projected growth of 7.3% and will further accelerate to 7.6% in 2019. Traders also took note of report that 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. Meanwhile, 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. Market participants got some respite with RBI data showing that banks’ credit grew by 12.78% to Rs 86,60,069 crore in the fortnight ended July 6. The data also showed that banks’ deposits rose by 8.33% to Rs 114,85,768 crore from Rs 106,01,663 crore in the previous fortnight. Finally, the BSE Sensex slipped 22.21 points or 0.06% to 36,351.23, while the CNX Nifty was down by 23.35 points or 0.21% to 10,957.10.