Markets likely to make positive start on sanguine global cues

Indian markets snapped three days winning streak and settled in red territory on Thursday dragged by losses in Yes Bank, amid weak cues from global markets and unabated foreign fund outflow. Today, the start of last trading session of week is likely to be positive mirroring firm trade in Asian peers. Traders will be getting some encouragement with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the focus of the second term of the Narendra Modi government is accelerated economic growth led by the private sector and private enterprise. He asserted that India will be at the cusp of a major transformation over the next five years. Some support will also come with the Reserve Bank of India’s (RBI) latest data showing that bank credit and deposits grew 12.02 percent and 10.32 percent to Rs 96.975 trillion and Rs 126.746 trillion, respectively in the fortnight to July 5. In the previous fortnight to June 21, bank loans had risen 12 percent to Rs 96.485 trillion and deposits 10.02 percent to Rs 124.905 trillion. Traders may take note with ICRA’s report  that predicted the current account deficit (CAD) will remain largely steady for the first quarter of financial year 2019-20. It stated that the CAD in Q1 FY20 will print at $16-17 billion, from $15.8 billion in Q1 FY2019. Meanwhile, the government has approved an outlay of Rs 206.8 crore for 2019-20 for a central sector scheme titled Implementation of Agriculture Export Policy aimed at doubling farmers’ income by 2022. However, there may be some cautiousness with Union finance minister Nirmala Sitharaman’s statement that those foreign portfolio investors (FPIs) who wish to be out of the net of the surcharge on high net worth individuals, may consider the option of structuring as companies as the foreign portfolio investors registered as trusts will have to pay the new tax surcharge. There will be some reaction in agriculture related stocks with report that India’s June-end foodgrain stocks have reached new peaks on account of high procurement and slow stock liquidation. As on July 1, 2019, grain stocks were almost 81 per cent above the buffer stock and strategic reserve norms.

The US markets settled in green territory on Thursday after a Federal Reserve official said central banks must lower interest rates swiftly on signs of economic weakening. Asian markets are trading higher on Friday following overnight gains on Wall Street.

Back home, bears made a comeback on Dalal Street on Thursday, with Sensex and Nifty closing the day lower by around 300 & 100 points, respectively. After a negative start, key indices remained lackluster throughout the day, as Asian Development Bank (ADB) in its supplement to the Asian Development Outlook 2019 slashed India's gross domestic product (GDP) growth forecast to 7 percent for the current fiscal (FY20), from 7.2 percent projected earlier, on the back of fiscal shortfall concerns. Adding more worries, the International Monetary Fund (IMF), which has warned that the US-China trade war could cost the global economy about $455 billion next year, said recent trade policy actions were weighing on global trade flows, eroding confidence, and disrupting investment. In the last leg of the trade, markets extended their losses to end near their intraday low points, tracking weak global markets. Domestic sentiments got hit with the India Meteorological Department’s (IMD) statement that the country’s monsoon rains were 20 per cent below average in the week ending on Wednesday, as rainfall was scanty over the central, western and southern parts of the country. It also raised concerns over the output of summer-sown crops. Monsoon rains are crucial for farm output and economic growth, as about 55 per cent of India's arable land is rain-fed, and agriculture forms about 15 per cent of a $2.5 trillion economy that is the third biggest in Asia. Finally, the BSE Sensex lost 318.18 points or 0.81% to 38,897.46, while the CNX Nifty was down by 90.60 points or 0.78% to 11,596.90.