Markets to make optimistic start ahead of RBI policy meet outcome

Buying in last leg of trade helped Indian equity markets to end Tuesday’s session in green territory, with Sensex and Nifty ending at record closing high, supported by IT, energy, metal and pharma stocks. Today, the start of the new month is likely to be on a positive side, ahead of the Reserve Bank of India’s (RBI’s) monetary policy meeting outcome as well as an outcome from FOMC meeting which will be out later in the day. RBI’s monetary policy committee is expected to maintain its neutral policy stance given the volatility in crude oil and food prices. Investors will also be eyeing manufacturing PMI data to be out later in the day. Traders will be getting encouragement with the commerce and industry ministry’s data showing that growth of eight core sectors expanded to 7-month high of 6.7% in June on the back of better performance by cement, refinery and coal segments. Investors may get some support with a private report that the Indian economy is likely to have witnessed solid economic growth in the April-June quarter but leading indicators suggest a slowdown in the coming months. The report stated that GDP growth to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half. Traders will also be reacting to the Controller General of Accounts’ (CGA) data showing that government’s finances have shown improvement in the June quarter of 2018-19 with fiscal deficit working out to 68.7% of the Budget Estimate, mainly on account of higher revenue collection. Meanwhile, the United States on Monday designated India as a Strategic Trade Authorization-1 (STA-1) country - a status that will allow the country to buy highly advanced and sensitive technologies from America. There will be buzz in banking sector stocks, with report that Indian banks stood on gross bad loans of more than Rs 9.61 lakh crore by the end of 2017-18, while loans to industries formed a major chunk of such non-performing assets. Besides, S&P Global Ratings said that India’s weak banking system will strengthen over couple of years as stressed loans are cleared and capital base expanded by government’s fund infusion in state-owned lenders. There will be some important earnings announcements too to keep the markets buzzing.

The US markets ended higher on Tuesday, following good earnings and economic data and a report that US-China trade talks would resume. Asian markets were trading mostly in green on Wednesday, following gains on Wall Street, as a report of attempts to renew talks between the US and China eased trade war fears, but investors will be keeping a close eye on data due today.

Back home, extending record hitting spree for fourth straight session, Indian equity benchmarks once again settled at fresh closing highs. Key gauges started on pessimistic note, as traders remained cautious with report that corporate India’s business optimism index for the July-September quarter registered an 11.7% increase over last year, while on a quarter-on-quarter basis it has declined. Some anxiety remained among the local traders with Moody’s Investors Service’s report which stated that the GST Council’s decision to lower rates on several goods and also rationalise rates on some services will impact government’s fiscal consolidation effort. Investors took note of Reserve Bank of India’s (RBI’s) data showing that India Inc raised $2.71 billion through external commercial borrowing (ECB) and rupee-denominated bonds (RDBs) in June 2018, up by 66.3% over the same month last year. As per the data, Indian companies had raised $1.63 billion from overseas sources in June 2017. The mood on the street also remained cautious ahead of the RBI’s monetary policy outcome. However, buying which emerged in last leg of trade mainly helped markets to settle above their crucial 37,600 (Sensex) and 11,350 (Nifty) levels. Sentiments turned positive on report that the government sought Parliament’s approval for additional gross additional expenditure of Rs 11,697.92 crore for the current fiscal. Traders took note of a private report stating that GDP growth is likely to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half. Market participants also took some support from Crisil’s report that India is much better placed than many other emerging market peers or compared to its own situation in 2013 during the taper tantrum, to tackle risks arising out of asymmetry in monetary policy of advanced economies, the rise in crude prices and the escalation of trade war tension. Adding to the optimism, Commerce Minister Suresh Prabhu has said that the government is taking legislative as well as administrative measures for an integrated strategy to reduce logistics related hurdles for boosting domestic and global trade. Finally, the BSE Sensex surged 112.18 points or 0.30% to 37,606.58, while the CNX Nifty was up by 36.95 points or 0.33% to 11,356.50.