Markets likely to make cautious start on Tuesday

Indian markets extended their losses for second straight session on Monday dragged by losses in index heavyweights HDFC Bank, L&T and Bajaj Finance, amid heavy selloff in global equities. The indices reported their biggest one-day fall in 2019. Today, the markets are likely to make a cautious start amid weak global cues and ahead of first quarter (April-June) results. IT major Tata Consultancy Services (TCS) will report its numbers later in the day. There will be some cautiousness with CARE Ratings’ report that economic slowdown has begun to dent the credit profile of India Inc. There has been a deterioration in the credit quality of entities rated in the first quarter of the current financial year, showing effect of the prevailing slowdown in the Indian economy. It added that the credit rating downgrades have been largely on account of liquidity pressure leading to, at times, delays in debt servicing, high debt levels, weakening profit margins, decline in scale of operations. However, some support may come later in the day with the Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement the financial system is hugely surplus with liquidity and this would facilitate the better transmission of rate cuts implemented by the RBI. Besides, P C Mody, chairman of the Central Board of Direct Taxes (CBDT), has said the government will soon issue a clarification on the increase in the tax rate on foreign portfolio investors to allay their concerns. Traders may took note of the Governor Shaktikanta Das’ statement that the central bank will discuss with the government the issuance of overseas sovereign bonds, an instrument that will help reduce dependence on the domestic market for bridging fiscal deficit. The RBI issues bonds on behalf of the government as part of the resource mobilisation exercise to fund gap between revenue and expenditure. There will be some buzz in the telecom stocks with report that regulator Trai has stuck to its recommendation on base price and valuation of the spectrum, including for 5G radiowaves, making it clear to the telecom department that it has considered all relevant factors while giving views on prices. There will be some reaction in metal stocks with report that the country's finished steel imports rose 4.7 percent to 7.83 million tonne (MT) in 2018-19.

The US markets declined on Monday as dimming prospects that the Federal Reserve will cut interest rates anytime soon weighed on equities. Asian markets are trading mixed on Tuesday following overnight fall on Wall Street.

Back home, bears took full control on Dalal Street on Monday, as both the larger peers, the Sensex and the Nifty, closing lower by around 800 and 250 points, respectively. The markets made a negative start of the day, amid reports that foreign institutional investors (FIIs) sold shares worth Rs 89 crore on a net basis in the cash market, while domestic institutional investors (DIIs) bought shares worth Rs 276 crore. Anxiety remained among the market participants, as India Meteorological Department (IMD) data report showed that monsoon has covered almost the entire country, but three-fourths of MeT department’s sub-meteorological divisions still fall under the ‘deficient’ rainfall category. In the second half of the session, bears tighten their grip, on account of weak cues from European markets. Domestic sentiments remained pessimistic with Moody's report that there are risks of India missing 3.3 percent fiscal deficit target for the current financial year if tax revenue falls short of the projection. The Budget 2019-20 lowered fiscal deficit projection for the current financial year to 3.3 percent from 3.4 percent targeted in the Interim Budget 2019-20 in February. The street overlooked Secretary in the DPIIT, Ramesh Abhishek’s statement that the initiatives announced by the government for start-ups in the Union Budget would significantly improve the flow of funds and encourage budding entrepreneurs. Finally, the BSE Sensex lost 792.82 points or 2.01% to 38,720.57, while the CNX Nifty was down by 252.55 points or 2.14% to 11,558.60.