Markets likely to make flat-to-negative start amid weak global cues

Indian equity markets ended Tuesday’s session in negative territory, recovering partly from the day’s low, followed by Reserve Bank of India’s (RBI) decision to hike key interest rates by 25 basis points to 6.5%. Today, the markets are likely to make flat-to-negative start amid weak global cues. Traders will be concerned with RBI Governor Urjit Patel flagging the risks to macroeconomic stability from a potential currency war in the wake of rising global trade tensions. Also, there will be negative reaction on EEPC India chairman Ravi Sehgal’s statement that the 25 basis points increase in the interest rates by the RBI is a big negative for exporters, as they would become less competitive in a tough global market that is already facing the threat of tariff war. However, traders may get some support later in the day with report that RBI has maintained its growth outlook for the economy, estimating the country’s Gross Domestic Product (GDP) to grow at 7.4% in 2018-19. It noted that GDP growth would range between 7.5-7.6% in H1 and 7.3-7.4% in H2. There will be some support with the Ministry of Finance’s statement that Goods and Services Tax (GST) revenue collections for the month July reached Rs 96,483 crore, which remains broadly on expected lines. The tax revenue from GST collection increased in comparison to Rs 95,610 crore seen during the month of June. Meanwhile, the Cabinet has approved GST laws amendments which included hiking threshold limit for availing composition scheme dealers to Rs 1.5 crore, among other things. There will be lots of earnings announcements too, to keep the markets in action.

The US stocks ended mostly lower on Wednesday, after the Federal Reserve left interest rates unchanged but signaled another imminent rate increase. Asian markets were trading mostly in red in early deals on Thursday, with sentiment fragile after the latest escalation in Sino-US trade war while global bond markets were rattled by Washington’s increased borrowing and Japan’s new tolerance for higher yields.

Snapping record hitting spree, Indian equity benchmarks ended the volatile day of trade with marginal losses, after RBI raised repo rate. Markets started the session in green terrain with traders taking encouragement from 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. Some support also came 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 also took note of report that 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. However, sentiments turned pessimistic after the RBI’s Monetary Policy Committee (MPC) raised the repo rate by 25 basis points to 6.50%. It is the first time since October 2013 that the rate has been increased at consecutive policy meetings. Markets showed some strength to pare all of their losses in last leg of trade, but the recovery proved short lived and key gauges settled in red terrain, as sentiments turned downbeat on report that growth in India’s manufacturing industry slowed last month, largely pressured by a modest weakening in demand and output, though overall conditions remained solid. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, decreased to 52.3 in July from June’s 53.1. Finally, the BSE Sensex declined 84.96 points or 0.23% to 37,521.62, while the CNX Nifty was down by 10.30 points or 0.09% to 11,346.20.