Benchmarks likely to make cautious start on Tuesday

Indian markets ended at another record highs on Monday as investors continued to cheer Prime Minister Narendra Modi’s massive victory. Today, the start of session is likely to be cautious as there will be some cautiousness with the Federation of Indian Chambers of Commerce & Industry’s (FICCI) statement that India’s slowing economic growth is of serious concern and the country needs to urgently cut tax and interest rates to revive the economy. The economy grew 6.6 per cent in the three months to December - the slowest pace in five quarters. It added that the recent signs of a slowdown in the economy stem not only from slow growth in investments and subdued exports but also from weakening growth in consumption demand. Traders will also be concerned about rating agency Ind-Ra’s statement that India’s GDP growth during the fiscal 2018-19 is expected at 6.9 per cent, marginally lower than CSO’s advance estimate of 7 per cent. It also urged the new government to take short-term measures to arrest the slowdown in the economy. Besides, SBI Ecowrap report said that the country’s economic growth in the fourth quarter ended March 2019 is expected to moderate to 6.1-5.9 per cent, which could pull down growth rate for the entire fiscal 2018-19 to below 7 per cent. However, some respite may come later in the day with report that the commerce ministry is considering a major export promotion scheme to ensure expeditious refund of central and state taxes and levies to boost shipments in the wake of global challenges at trade front. The new scheme would ensure refund of all un-rebated central and state levies and taxes imposed on inputs that are consumed in exports of all sectors. There will be some buzz in the Information and Technology (IT) sector stocks with Crisil’s research wing stating that profitability of IT companies is set to be impacted by adverse policies like the one on H1-B visas in the key US market, with margins estimated to narrow by up to 0.80 per cent in 2019-20. It added that revenues are set to rise by 7-8 per cent in dollar terms for the over $180 billion industry in this fiscal on the back of faster growth in digital services. There will be lots of earnings reaction based on the performance of the companies.

The US markets remained closed on Monday for the Memorial Day holiday. Asian markets are trading mostly in green on Tuesday, following European gains, as relief over EU election results eased concerns about political difficulties.

Back home, Indian equity benchmarks scaled to fresh record closing highs on Monday, with Sensex and Nifty gaining more than half a percent each. Key indices made a cautious start of the day, amid reports that foreign investors have pulled out a net amount of Rs 4,375 crore from the Indian capital markets in May so far, driven by global and domestic factors. Trading sentiments were also subdued during early morning deals with another private report stating that the fourth quarter (January to March 2019) financial results released by 304 companies in the corporate sector show a sequential drop in revenue growth to 10.7 per cent from 20.1 per cent in the previous quarter (October to December 2018). Traders took a note of Niti Aayog vice-chairman Rajiv Kumar’s statement which stressed on the revamp and modernisation of the Indian statistical system so that real-time data is captured and used for policy analysis. But, markets soon gained ground to rally throughout the session, as the Reserve Bank of India (RBI) said it will inject Rs 15,000 crore into the financial system in the month of June 2019. It will infuse liquidity through purchase of government bonds via the auction route. Investors took encouragement after international rating agency S&P Global Ratings said that the landslide victory for Prime Minister Narendra Modi-led BJP in the general election is likely to improve the flow of foreign capital for corporates in India. Adding more comfort, the Commerce and Industry Ministry proposed cutting down compliance time significantly to just one hour per month for start-ups as part of measures to ease regulatory requirements for budding entrepreneurs. The proposal is a part of 'Start-up India Vision 2024', prepared by the Department for Promotion of Industry and Internal Trade (DPIIT) for the new government to promote the growth of budding entrepreneurs. Finally, the BSE Sensex gained 248.57 points or 0.63% to 39,683.29, while the CNX Nifty was up by 80.65 points or 0.68% to 11,924.75.