Markets likely to make cautious start amid weak macro-economic data

Indian markets wiped out early gains and ended lower in the volatile session on Friday mainly due to late hour sell-off led by declines in IT firm Wipro and Oil and Natural Gas Corporation. Today, the markets are likely to make a cautious start of new week amid weak macro-economic data coupled with mixed global cues. As per Central Statistics Office (CSO) data, India's Index of Industrial Production (IIP) growth slipped to 3.1 per cent in May mainly on account of subdued performance of mining and manufacturing sector. The IIP had expanded by 3.8 per cent in May 2018. Besides, India's retail inflation hit a eight-month high in June on higher food prices, but stayed below the central bank's target, potentially giving it room for a further interest rate easing to boost slowing growth. Moreover, investors will be eyeing India's Wholesale price inflation and balance of trade data for June will be out later in the day. There will be some cautiousness with the Ministry of Agriculture & Farmers’ Welfare’s statement that farmers have planted 41.3 million hectares with summer crops, down 8.6 per cent year on year, though the gap in sowing narrowed from the previous week as monsoon rains picked up. Besides, the US and Indian trade negotiators ended talks on Friday without making major progress on a range of disputes over tariffs and other protectionist measures imposed by both sides that are straining bilateral ties. However, some support may come later in the day with report that foreign investors have remained net buyers in the Indian capital markets this month so far, even as the equity segment saw robust outflows post the Budget. There will be some buzz in the non-banking financial companies (NBFCs) stocks with report that in a bid to deal with stress in the NBFC sector, guidelines will be issued soon for State-owned banks to take over pooled assets of NBFCs. There will be some reaction in the telecom socks with report that the telecom regulator is not in a position to modify its previously recommended penalty on Vodafone India and Idea Cellular (now merged) and Bharti Airtel as it is bound by the provisions of TRAI Act. There will be some important earnings announcements too to keep the markets buzzing.

The US markets ended higher on Friday on optimism the Federal Reserve will soon cut its benchmark interest rate. Asian markets trading mixed on Monday as investors await the release of Chinese gross domestic product data for the second quarter.

Back home, volatility hit over Indian equity benchmarks on Friday, with both larger peers, the Sensex and the Nifty ending lower by losses of 86 and 30 points, respectively. The markets made a cautious start of the day, after former finance minister P Chidambaram said that the Union Budget 2019-20 does not chalk out a clear roadmap to take India on the path of high economic growth and lacks bold steps and structural reforms. The street also remained concerned with US Commerce Secretary Wilbur Ross’ statement that India must recognize that its protectionist policies and tariff rules are hurting its companies and are a big impediment to attracting foreign direct investment. The markets staged recovery in the second half of the session, supported with Finance Minister Nirmala Sitharaman’s statement that the big picture presented in the Budget is backed with a plan to increase investment without compromising on the fiscal consolidation roadmap. Some relief also came with a report stating that as rainfall in the first 11 days of this month was 24% more than ‘normal’, the overall season’s rain deficit came down to 12%, from 33% witnessed in June. But, key indices failed to hold gains and slipped into red terrain, as traders got cautious ahead of release of index of industrial production (IIP) for May and consumer price index-based inflation for June. Finally, the BSE Sensex fell 86.88 points or 0.22% to 38,736.23, while the CNX Nifty was down by 30.40 points or 0.26% to 11,552.50.