Markets to make a cautious start on Wednesday

Indian equity markets retreated from record highs and ended the Tuesday’s session with marginal losses, due to profit-booking by funds and retail investors. Today, the markets are likely to make a cautious start, as there will be some concern with ICRA’s latest report that in spite of corporates witnessing a healthy 22% revenue growth in the June quarter, most have seen flat margins, with airline and cement companies seeing declining margins due to rising input costs and crude prices. Traders will also be reacting to Care Ratings’ report that there has been a marginal decline of 1% in employment growth at 6.6%, mainly due to a larger number of companies having witnessed lower or negative hiring growth. It added that the employment growth in 2016-17, was at 7.7%. Meanwhile, the Lok Sabha has approved the first batch of supplementary demands for grants envisaging a gross additional outgo of Rs 11,697.92 crore for the current fiscal. There will be buzz in the banking sector stocks with report that Indian banks reported a total loss of about Rs 70,000 crore due to frauds during the last three fiscals up to March 2018. The extent of loss in fraud cases reported by scheduled commercial banks (SCBs) for 2015-16, 2016-17 and 2017-18 was Rs 16,409 crore, Rs 16,652 crore and Rs 36,694 crore, respectively. Also, there will be buzz in the textile sector stocks with report that the government doubled import duty on as many as 328 textile products to 20% to provide a boost to manufacturing of these items in the country. There will be some important earnings announcements too to keep the markets buzzing. Besides, CreditAccess Grameen will open its initial public offer (IPO) for subscription on August 8. The company has fixed a price band at Rs 418-422 per share for the issue which will close on August 10 and it is likely to make a debut on August 20.

The US markets ended higher for third straight session on Tuesday, with strong corporate earnings reports lifting major indexes as tariff tensions simmer. Asian markets were trading mostly in green on Wednesday, on the back of firmer Wall Street earnings, while expectations for increased Chinese stimulus helped take the edge off wider concerns about the worsening Sino-US trade dispute.

Back home, Tuesday turned-out to be a lackluster day of trade for Indian equity benchmarks, with frontline gauges trading in green and red throughout the session to end flat. Traders remained cautious with president of the International Economic Association, and former chief economist at the World Bank, Kaushik Basu’s statement that in the event of US-China currency war there will be a sideline effect on India and a depreciation of the rupee, which, if managed well by policymakers, will be good for the country. Anxiety also spread among investors, with a report stating that the rupee is over-valued and the fair value of the local currency is 70-71 to a greenback. The widening current account deficit and higher interest rates have made the rupee the worst among its Asian peers so far this year. However, traders took some solace with rating agency ICRA’s report that revenues of Indian corporates have grown by 22% in the June quarter from a year ago. It added that the increase in revenues has been attributed to the strong growth in both consumer-based industries such as consumer goods, and auto; and commodity sectors such as cement, iron, steel, and oil and gas. Traders also took note of a report that the government will set up a group of ministers (GoM) to look into issues related to the proposed mega free trade agreement the Regional Comprehensive Economic Partnership (RCEP). Meanwhile, the government withdrew the Financial Resolution and Deposit Insurance (FRDI) Bill following widespread concerns over certain provisions in the proposed legislation. There have been concerns over the proposed bail-in clause to resolve a failing bank and insurance cover on bank deposits. Finally, the BSE Sensex shed 26.09 points or 0.07% to 37,665.80, while the CNX Nifty was up by 2.35 points or 0.02% to 11,389.45.