Benchmarks likely to get negative start of new week

Indian markets ended lower on Friday as oil prices surged after US airstrikes killed a top Iranian commander, intensifying geopolitical tensions in the Middle East. Today, the start of new week is likely to be negative tracking weakness in global peers amid US-Iran tensions. Investors will be eyeing Services Purchasing Managers Index (PMI) for the month of December to be out later in the day. There will be some cautiousness with report that foreign portfolio investors (FPIs) began the year with profit booking as they withdrew a net sum of Rs 2,418 crore from the Indian capital markets in the first three trading sessions of January. Traders will be concerned with apex exporters body FIEO’s statement that further escalation in the tension between the US and Iran will have implications on India’s exports to the Persian Gulf nation. However, some support may come later in the day with the Reserve Bank of India’s (RBI) data showing that the country's foreign exchange reserves swelled by $2.520 billion to touch a record high of $457.468 billion in the week to December 27. Some support may also come on report that the Commerce and Industry Ministry has prepared a blueprint to further improve India's ranking in the World Bank's ease of doing business index with a focus on six parameters, including enforcing contracts and starting a business. Meanwhile, the RBI will carry out its third round of simultaneous purchase and sale of government securities today. The central bank would purchase Rs 10,000 crore worth of long-term government bonds and sell an equivalent amount of short-term securities. There will be some buzz in the auto stocks as rating agency ICRA maintained a negative outlook on the passenger vehicle (PV) and commercial vehicle (CV) segments. It said the negative outlook on the PV sector was due to the slowing economic growth, the sharp decline in wholesale despatches to destock dealership inventory as well as tepid retail demand. IT stocks will be in focus with a private report stating that the US Citizenship and Immigration Services' (USCIS), the department in charge of issuing the coveted H-1B visas, will switch to a new system come April that could hurt the Indian IT industry. There will be some reaction in banking stocks with report that the government is unlikely to announce capital infusion for the public sector banks (PSBs) in the upcoming Budget and will rather encourage them to expedite recovery of bad loans and raise funds from the market.

The US markets ended in red on Friday after a US airstrike killed a top Iranian general, reigniting geopolitical tensions in the Middle East coupled with weak US factory data. Asian markets are trading mostly lower on Monday following heightened geopolitical tensions in the Middle East.

Back home, weakness hit the Dalal Street on Friday, with Sensex & Nifty losing over 150 & 50 points, respectively. After a lackluster opening, indices remained negative for the whole day, impacted with a private report indicating that India's real GDP growth would weaken further in Q3 of the financial year due to slow economic activity in the first two months of the second half and the GDP for FY20 could be around 4.5%. Adding more worries, think-tank Centre for Monitoring Indian Economy (CMIE) stated that India's unemployment rate increased to 7.7% in December, slightly higher than 7.48% reported in the previous month. In the second half of the session, losses got intensified, on the back of negative cues from European markets. Traders remained pessimistic, even after a private report stated that the Indian economy benefited from 'favourable external environment' in 2019, following which portfolio inflows into equity and debt touched a multi-year high, and if this momentum is sustained it will bode well for the country's external balance. The street overlooked a report that India can explore an annual $82-billion export potential in twenty products, including electrical equipment and ferro alloys, in the world's second largest economy China. Finally, the BSE Sensex fell 162.03 points or 0.39% to 41,464.61, while the CNX Nifty was down by 55.55 points or 0.45% to 12,226.65.