Markets likely to make cautious start amid weak global cues

Indian markets ended higher with marginal gains to settle at record closing highs for third straight session on Tuesday, amid expectations that a stable government at the Centre will boost growth and lead to higher foreign fund inflows. Today, the markets are likely to make a cautious start tracking weak global cues. Traders will be concerned about the Department for Promotion of Industry and Internal Trade’s (DPIIT) latest data showing that foreign direct investment (FDI) in India declined for the first time in the last six years in 2018-19, falling by 1 per cent to $44.37 billion as compared to $44.85 billion in 2017-18. According to the data, FDI inflows in telecommunication, construction development, pharmaceuticals and power sectors declined significantly in 2018-19. Decline in foreign inflows could put pressure on the country's balance of payments and may also impact the value of the rupee. However, some respite may come later in the day with a global study showing that India has moved up one place to rank as the world’s 43rd most competitive economy on the back of its robust economic growth, a large labour force and its huge market size, while Singapore has toppled the US to grab the top position. Traders may take note of a private report indicating that India can attract FDI to a ratio of 1.5 per cent to 2 per cent of its GDP by further improving on ease of doing business and building infrastructure. There will be some buzz in the steel industry stocks with a report that amid concerns about sluggish steel demand and dumping threat from China, domestic steel may register a growth of 6-8 per cent in the current financial year. There will be some reaction in power sector stocks with report that power production in India is expected to grow by five to six per cent during FY 2019-20, riding on improved demand from newly connected households. Also, there will be some buzz in the oil marketing companies (OMCs) stocks with report that thinner spreads and rising under-recoveries are expected to shave the operating profit margins of OMCs by 1.5-1.7 per cent this fiscal, even as crude prices remain elevated and volatile. There will be lots of earnings reaction based on the performance of the companies.

The US markets ended lower on Tuesday amid lingering concerns about the economic impact of the ongoing trade dispute between the US and China. Asian markets are trading mostly in red on Wednesday as investors remained cautious, awaiting new developments between Beijing and Washington amid the ongoing trade tensions.

Back home, in a volatile trade, key Indian bourses, Sensex and Nifty settled at record closing high points for third straight session on Tuesday. After a positive start, the markets traded volatile throughout the session, impacted 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. FICCI made a strong case for fiscal stimulus to pump-prime the slowing economy amid global headwinds and weakening domestic demand in the next budget as the Narendra Modi government is all set to begin its second innings. Traders also remained worried with India Ratings and Research’s (Ind-Ra) latest report stating that India’s gross domestic product (GDP) is likely to grow at 6.9 percent in the fiscal 2018-19 (FY19), slightly lower than Central Statistics Office’s (CSO) advance estimate of 7 percent. However, in the last leg of the trade, key indices managed to stage recovery and ended the trading session in green terrain, amid reports that the commerce and industry ministry is considering a major export promotion scheme to ensure expeditious refund of all un-rebated central and state levies and taxes imposed on inputs that are consumed in exports of all sectors. Adding optimism among the market participants, eminent economist Arvind Panagariya said that the new government can start by cutting corporate tax to 25 percent and removing exemptions. Meanwhile, Industry body Confederation of Indian Industry (CII) has called for lowering corporate tax rate, kick-starting government expenditure and rationalization of dispute tax resolution mechanism. Finally, the BSE Sensex gained 66.44 points or 0.17% to 39,749.73, while the CNX Nifty was up by 4.00 points or 0.03% to 11,928.75.