Benchmarks likely to make cautious start on Tuesday

Indian markets extended their losing streak for fourth straight session and ended with cut of around a percent on Monday after survey data from IHS Markit showed that India's private sector expanded at the slowest pace in seven months in April amid softer growth in services activity. Today, the markets are likely to make a cautious start following mixed global cues amid trade concerns. US President Donald Trump’s top trade negotiator said Washington plans to proceed with a tariff hike on Chinese goods on Friday. There will be some cautiousness with report that while the tax department's e-filing website showed returns filed in 2018-19 fell to 6.68 crore from 6.74 crore in the previous fiscal, the Central Board of Direct Taxes (CBDT) in a statement clarified that the returns filed included those of previous assessment years, excluding which returns filed in 2018-19 showed an almost 19 per cent rise. But the tax department had in the past taken returns filed in a fiscal year as a composite number to show a year-on-year increase. However, traders may get some support later in the day with a private report that if the BJP-led National Democratic Alliance (NDA) gets a second term, it will provide liquidity support to non-banking financial companies (NBFCs) that are facing cash crunch for a year now. There will be some buzz in the power sector stocks with rating agency Crisil’s report that total debt of state-owned discoms is set to increase to pre-Uday levels of Rs 2.6 trillion by the end of this fiscal year, as many states have limited fiscal headroom to continue to support them. The report noted that improvement in operations may face challenges because the focus on new rural connections without adequate tariff hikes can increase losses. There will be lots of earnings reaction based on the performance of the companies to keep the markets buzzing.

The US markets ended lower on Monday after President Donald Trump threatened to impose tariffs on all Chinese imports. Asian markets are trading mixed on Tuesday after US President Donald Trump's threat to raise tariffs re-ignited worries about US-China trade tensions.

Back home, Indian equity markets remained under bears’ grip on Monday, with Sensex and Nifty closing lower by around a percent each. Key indices made a negative start of the day, amid reports that in a first in recent history of tax filings, income tax e-filings in FY2019 have dropped. Income tax e-filings in FY 2018-19 was 6.68 crore, down from 6.74 crore in the previous fiscal. This is surprising given that post demonetisation it was expected that the tax base would continue to increase. Adding more anxiety among market participants, India’s services sector fell for the second consecutive month in April, with rates of new business and output growth both cooling to seven-month lows. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index eased to 51 in April from 52 in March. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- also slipped to 51.7 in April as against 52.7 in March. Weakness persisted in the markets during the whole day, on the back of weak cues from global markets. The street paid no heed towards reports that with a view to facilitate fundraising by start-ups, the Department for Promotion of Industry and Internal Trade (DPIIT) has proposed relaxation in the income tax laws pertaining to sale of residential properties and carrying forward of losses. Traders even overlooked the Reserve Bank of India’s (RBI) data showing that the country's foreign exchange reserves soared by $4.368 billion to $418.515 billion in the week to April 26, helped by the second dollar-rupee swap auction. In the swap auction conducted on April 23, the RBI had received bids worth $18.65 billion against $5 billion on offer. It accepted just five bids worth $5 billion. Finally, the BSE Sensex slipped 362.92 points or 0.93% to 38,600.34, while the CNX Nifty was down by 114.00 points or 0.97% to 11,598.25.