Markets likely to make weak start on Monday

Indian markets snapped six-day losing streak and ended higher on Friday with Sensex and Nifty recapturing their 37,800 and 11,250 levels, respectively, led by gains in auto and banking stocks. Today, the markets are likely to make a weak start following negative trend in the Asian peers. Traders will be concerned with the latest depositories data showing that reversing their five-month buying trend, overseas investors have pressed the exit button in July and pulled out a net Rs 3,758 crore from the Indian capital markets on account of multiple headwinds, including the super-rich tax announced in Budget 2019-20. Foreign portfolio investors (FPIs) pulled out a net sum of Rs 14,382.59 from equities during July 1-26, but invested Rs 10,624.15 crore in the debt segment, taking the total net outflow to Rs 3,758.44 crore. There will be some cautiousness with a report that midway into earnings season, it is clear that India Inc’s P&L account remains under pressure. Revenue growth is so sluggish that even a modest increase in costs has not helped companies protect their margins. Traders may also take note of report that Finance Minister Nirmala Sitharaman has ruled out reconsidering a plan to issue foreign currency overseas sovereign bonds, despite warnings of long-term risk for the economy. However, some respite may come later in the day as India's chief economic advisor to the Union finance minister Krishnamurthy Subramanian exuded confidence in the economy swelling to a $5-trillion giant by 2025, saying the high target is definitely achievable. Meanwhile, the Insolvency and Bankruptcy Board of India (IBBI) has amended norms pertaining to insolvency resolution process for corporate persons and liquidation process. Moreover, markets watchdog SEBI has eased the conditions for exchanges to provide incentives under liquidity enhancement schemes (LES) in the first five years of operation. There will be some buzz in the auto stocks as the high-powered GST Council decided to reduce the tax rate on electric vehicles (EVs) to 5% from the existing 12%, a move aimed at accelerating the adoption of eco-friendly mobility solutions. The new Goods and Services Tax (GST) rate on EVs will be effective from August 01. Besides, mobile marketing firm Affle India will open its initial public offering for subscription on July 29. The company is aimed to raise Rs 456.52 crore at the lower end of the price band and Rs 459 crore at the higher end of the price band of Rs 740-745 per share. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets ended higher on Friday on the back of strong earnings and better-than-expected GDP data. Asian markets are trading in red on Monday amid US-China talks to resume in Beijing later this week amid low expectations for a major breakthrough.

Back home, key Indian indices snapped 6-day losing streak on Friday and ended the session in green terrain. After a cautious start, markets traded volatile, amid reports that despite heavy buying by foreign investors in the last month of 2018-19 (FY19), foreign portfolio investors remained net sellers of $5.5 billion in the market. An announcement of increase in surcharge on the super-rich in the Union Budget FY20 has weighed on portfolio investors and witnessed outflows, especially in the equity segment. Sentiments remained muted, amid a private report stating that India Inc's deal activity in the first six months of this year encompassing both M&A and private equity transactions, stood at $32.1 billion, down 57 per cent over last year. Despite volatility, key indices managed to remain in green terrain for the most part of the session, as rating agency CRISIL in its latest report said that the Reserve Bank's newly introduced guidelines curbing working capital limits may lead to better financial discipline. Some support also came with Niti Aayog CEO Amitabh Kant’s statement that India was pursuing a policy of import substitution so far, and in future, the country's policy will essentially focus on export-led growth. He said India has huge potential to become a global manufacturing hub for electronics products. Some relief also came with the Employees' State Insurance Corporation (ESIC) payroll data report that around 12.66 lakh jobs were created in May, a tad higher than 11.15 lakh jobs in April this year. Finally, the BSE Sensex gained 51.81 points or 0.14% to 37,882.79, while the CNX Nifty was up by 32.15 points or 0.29% to 11,284.30.