Sensex, Nifty likely to open in red amid weak global cues

Indian markets ended lower for ninth straight session on Monday with losses of around a percent, mainly on account of late hour sell-off, as the trade talks between China and US failed to bring any breakthrough. Today, the markets are likely to make pessimistic start tracking weak global cues amid escalation in US-China trade tensions. Market participants will be looking forward to Wholesale Price Index (WPI) to be released later in the day. Traders will be concerned about the Central Statistics Office (CSO) data showing that retail inflation inched up to a six-month high of 2.92% in April due to a spike in food prices, including vegetables, meat, fish and eggs. Inflation based on the Consumer Price Index (CPI) was at 2.86% in the previous month and 4.58% in April 2018. The rate of price rise in April is the highest since October 2018 when the rate was 3.38%. As per the data, the inflation in the food basket was 1.1% in April, up from 0.3% in March. Also, there will be some cautiousness with global analytical company Crisil’s statement that its research expects headline inflation, measured by the CPI to rise 60 basis points (bps) to 4% this fiscal from 3.4% in fiscal 2019. This base case assumes food inflation rising to 3% from an abnormal low of 0.1%. Traders may take note of Moody's Investors Service’s statement that India’s rising oil consumption will support its investments in refining capacity additions and upstream production, but imports will keep growing amid stagnant production. The country's dependence on imported crude oil to meet its needs has risen to 83.7% in 2018-19 fiscal year from 82.9% in 2017-18. Import dependence was 80.6% in 2015-16. However, some respite may come later in the day with Chief Economic Advisor (CEA) Krishnamurthy V. Subramanian’s statement that the Indian economy will grow at 7% range in the current fiscal powered by the effects of the strong structural reforms such as bankruptcy laws, Goods and Services Tax (GST), crackdown on shell companies and the fiscal prudence undertaken in the last five years. There will be some buzz in the power sector stocks with a private report that India is expected to add about 80 gigawatts (GW) of renewable energy capacity in the next five years. About 47 GW will be from utility scale solar, 21 GW from wind, 8 from rooftop solar and 3 GW from floating solar projects. There will be lots of earnings reaction based on the performance of the companies.

The US markets declined on Monday as China said it would raise steep tariffs on $60 billion in US goods, upping the stakes of a trade war that threatens to imperil the global economy. Asian markets are trading mostly in red on Tuesday following sharp falls on Wall Street overnight, as the trade war between China and the United States escalated.

Back home, losing streak continued on the Dalal Street for ninth straight session on Monday, as Sensex and Nifty ended lower with sharp losses of over 350 and 100 points, respectively. The markets made a cautious start of day, as India industrial production measured by Index of Industrial Production (IIP) contracted to 0.1% in March 2019, the lowest in 21 months. It had grown by 5.3% in March 2018. As per the data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, IIP with base 2011-12 for the month of March 2019 stood at 140.2, which is 0.1% lower as compared to the level in the month of March 2018. Markets remained volatile throughout the day, even though the FICCI’s survey report indicated that the overall sentiment in the manufacturing sector remains positive as the proportion of respondents reporting higher output growth (around 54 percent) during the January-March 2018-19 (Q4FY19) remained the same as compared to Q3 (October-December) of 2018-19. In the last leg of trade, key indices saw steepest fall, on the back of weak cues from global markets along with heavy selling by traders. Domestic sentiments got further hit, amid reports that reversing their three-month buying streak, foreign investors pulled out a net Rs 3,207 crore from the Indian capital markets in the first seven trading sessions of May amid the US-China trade tensions and uncertainty over the election results. Prior to this, foreign portfolio investors (FPI) poured in a net Rs 16,093 crore in April, Rs 45,981 crore in March and Rs 11,182 crore in February in the domestic capital markets (both equity and debt). Further, investors also remained concerned with a private report stating that even as factory output fell to a 21-month low in March, the situation may not improve in the first few months of FY20 on account of the increased likelihood of lower investment activity and uncertainties around the elections. Finally, the BSE Sensex slipped 372.17 points or 0.99% to 37,090.82, while the CNX Nifty was down by 130.70 points or 1.16% to 11,148.20.