Markets likely to make positive start

Indian equity markets ended lower on Thursday, as investors scrambled for the exit amid a flare-up in Sino-US trade tension and the 25-basis point hike in the repo rate by the RBI to cool down inflation. Today, the markets are likely to make positive start, taking support from a private report that India’s economic growth momentum is likely to pick up further in the April-June period and the country is expected to clock GDP growth of 7.5% in this financial year. Investors will also be eyeing Services PMI data for the month of July to be out later in the day. However, there will be some cautiousness with the International Monetary Fund in its latest report stating that Real interest rates in India may drop by more than 150 basis points over the next decade. It said that a decline in the India’s dependent youth (those from ages 0-15 years) between 2020 and 2030 is expected to result in a reduction of long-term interest rates in the country. Traders will also be concerned with former Reserve Bank Governor C Rangarajan’s statement the full implementation of recent hike in Minimum Support Prices (MSP) for some of the agricultural products may push financial system under stress. Some anxiety may also be persist with Chairman of GST Implementation Committee Sushil Modi’s statement that revenue collection might fall in the next 3-4 months due to rate cuts on a number of items totalling to Rs 70,000 crore. Meanwhile, the trade ministry has said India plans to delay the imposition of retaliatory duties on US goods, to allow time to resolve disputes that worsened after President Donald Trump imposed tariff hikes on steel and aluminium. There will be buzz in markets, as around 82 companies will report their results for the quarter ended June today.

The US markets ended mostly higher on Thursday, as investors eyeing the July US jobs report due later on Friday, which will give a reading on the health of the world’s largest economy and possible clues about the pace of Federal Reserve interest rate rises. Asian markets were trading mixed in early deals on Friday, as investors were cautious amid an elevation in trade tensions between the US and China.

Back home, extending previous session losses, Indian equity benchmarks ended the Thursday’s trade with a cut of around a percent, breaching their crucial 37,200 (Sensex) and 11,250 (Nifty) levels, following the 25 basis points (bps) hike in repo and reverse repo rates by the Reserve Bank of India (RBI) on Wednesday. That apart, weak global sentiment on account of rising trade war fears also impacted sentiment. Markets started the session on pessimistic note and never looked in recovery mood to end near intraday low levels. Sentiments remained dampened since beginning, as traders remained 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, traders reacted negatively on EEPC India chairman Ravi Sehgal’s statement that the 25 bps 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. Markets extended losses in second half of the session as traders paid no heed towards 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. The market participants failed to take any support with Finance Minister Piyush Goyal’s statement that GST revenues will go up in the coming months on improved compliance and market demand. Traders even overlooked the Cabinet’s approval to GST laws amendments which included hiking threshold limit for availing composition scheme dealers to Rs 1.5 crore, among other things. Finally, the BSE Sensex declined 356.46 points or 0.95% to 37,165.16, while the CNX Nifty was down by 101.50 points or 0.89% to 11,244.70.