Markets likely to make pessimistic start amid weak global cues

Indian markets wiped out all of their early gains and ended lower with cut of over half a percent mainly due to late hour sell-off amid selling pressure in banking, auto, metal and financial services counters. Today, the markets are likely to make a pessimistic start tracking weak global cues. There will be some cautiousness with a private report that despite the policymakers' efforts to revive the sagging growth momentum, the economy is set to print in a 5.7 percent uptick in the June quarter and is likely to bottom out from there. It noted that India presents a picture of short-term despair and medium term hope. Traders will be also concerned with a private survey report stating that reflecting subdued sentiments, India has been ranked fourth globally in terms of business optimism, as only 64 per cent of corporates are optimistic about the country's economic growth over the next 12 months. Traders may take note of report that in its first report on GST, the Comptroller and Auditor General of India (CAG) has pointed out that the new tax regime has not achieved its full potential in terms of simplification even after two years of roll-out. The report also highlighted various other deficiencies and loopholes in the tax regime. The CAG has noted that the growth of indirect taxes slowed down to 5.8 percent in 2017-2018 as compared to 21.33 percent decline during 2016-2017. However, some respite may come later in the day with the government data showing that India received the highest-ever FDI inflow of $64.37 billion during the fiscal ended March 2019. According to the Annual Report 2018-19 of the Department for Promotion of Industry and Internal Trade (DPIIT), foreign direct investments (FDI) worth $286 billion were received in the country in past five years. There will be some buzz in the non-banking financial companies (NBFCs) stocks after the Reserve Bank of India (RBI) relaxed the end-use stipulations under external commercial borrowings framework for corporates and NBFCs. There will be some buzz in the power stocks with CRISIL’s report that the new payment security mechanism will benefit power-generation companies (gencos). It said that these companies are expected to get payments within the expiry of the official credit period in the region of 45-60 days.

The US markets settled lower on Tuesday after President Donald Trump renewed his attacks on China, decreasing hope the two largest world economies will reach a trade deal. Asian markets are trading in red on Wednesday as investors mulled pessimistic signs for US-China trade talks alongside a mixed set of corporate earnings ahead of the Federal Reserve’s long-awaited interest-rate cut.

Back home, Tuesday turned out to be yet another disappointing day for Indian equity markets, as both the larger peers, Sensex and Nifty, saw huge losses of 289 and 103 points, respectively. After a firm start, markets remained in green terrain for the most part of the session, aided with State Bank of India’s (SBI) Ecowrap report stating that India has benefited from US-China trade war by exporting more items to US and China. Adding some comfort, Finance Minister Nirmala Sitharaman called for a significant reduction in the central bank's policy rates and said the government did not intend to review the budget proposal for overseas sovereign borrowings. However, during noon deals, volatility hit the markets which had dragged the indices to near day’s low points. Sentiments got hit, amid Moody’s report that even as more and more crippled banks come out of the dud asset tunnel, the heightening growth slowdown & the lingering crisis at non-banking lenders pose fresh challenges to their asset quality. Some worries also came with CARE Ratings’ report that India is staring at a rise in food inflation soon, as weak monsoon rainfall hits the country’s food output. It said the retail inflation in the food components for June 2019 has risen to 13-months high & weak progress going ahead could push food inflation higher. Finally, the BSE Sensex fell 289.13 points or 0.77% to 37,397.24, while the CNX Nifty was down by 103.80 points or 0.93% to 11,085.40.