Sensex, Nifty likely to make cautious start of F&O series expiry session

Indian markets snapped three-day gaining streak on Wednesday and ended lower with losses of over half a percent on account fresh foreign fund outflow and rising worries over political disarray in Europe. Today, the start of the F&O series expiry session is likely to be cautious tailing the weakness in global markets amid concerns that the US and China dispute could escalate into a full-fledged trade war. On the domestic front, investors will keep an eye on new government formation and ministry allocation as Narendra Modi is set to take oath as the prime minister of India for the second term. Traders will also be looking ahead for the Q4 GDP data to be released on May 31, while there are expectations that numbers are likely to be weak. Market participants may take note a private report that the Reserve Bank of India (RBI) may leave repo rate unchanged next week due to uncertainty over oil prices, monsoon, weak transmission of monetary policy and on expected pick-up in inflation. It added that the central bank will also evaluate the implications of policies of the new government for growth and inflation. Meanwhile, the Department for Promotion of Industry and Internal Trade (DPIIT) has proposed to formulate a national retail policy to support growth of domestic trade. A national retail policy will be formulated to support development of the sector that would benefit 65 million small traders. There will be some buzz in the Non-banking financial companies (NBFCs) stocks with report that the RBI has extended minimum holding period requirement for NBFCs to raise funds via loan securitisation to help the sector overcome liquidity shortage. NBFCs have been permitted to securitise loans of over five-year maturity after holding them for six months on their books. Earlier, they were supposed to hold it for at least a year. There will be some reaction in aviation industry related stocks with global airlines’ grouping the International Air Transport Association’s (IATA) statement that India’s domestic air traffic registered first negative growth rate in more than five years in April, mainly due to the demise of Jet Airways. After a sustained period of very strong growth, Revenue Passenger Kilometres (RPKs) in the domestic India market are 0.5% lower than their year-ago level. There will be earnings reaction based on the performance of the companies.

The US markets declined on Wednesday as worries about slowing economic growth spurred coupled with trade tensions between the China-US. Asian markets are trading mostly lower on Thursday as rhetoric from Beijing and Washington over trade matters kept alive investor concerns about the tariff war's impact on global economic growth.

Back home, Indian equity benchmarks halted three days rally on Wednesday, with Sensex and Nifty losing more than half a percent each. After a weak start, key indices remained lackluster during the whole day, affected with the Department for Promotion of Industry and Internal Trade’s (DPIIT) latest data report showing that foreign direct investment (FDI) in India declined for the first time in the last six years in 2018-19, falling by 1% to $44.37 billion as compared to $44.85 billion recorded in 2017-18. Traders were seen taking a note of a private report that the Reserve Bank of India is expected to cut key policy rates by 25 bps in the upcoming monetary policy meeting amid subdued domestic industrial activity and slowdown in trade on the global front. Markets saw further fall in the late hours of trade, amid weak cues from global markets. Profit booking in recent gainers, also weighed on trading sentiments. The street paid no heed towards a report stating 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. Markets participants also overlooked another report indicating that India can attract FDI to a ratio of 1.5 percent to 2 percent of its GDP by further improving on ease of doing business and building infrastructure. It also said that the country is in favourable position to attract foreign firms planning to relocate their manufacturing bases due to trade tension between the US and China. Finally, the BSE Sensex slipped 247.68 points or 0.62% to 39,502.05, while the CNX Nifty was down by 67.65 points or 0.57% to 11,861.10.