Markets to get positive start on Tuesday

Indian markets ended sharply lower with losses of around 2 percent on Monday as investors flocked to safe havens after tensions in the Middle East lifted crude oil prices amid depression in rupee. Today, the markets are likely to make positive start on short-covering after a steep fall in the previous session following Asian peers. Investors will be eyeing the release of the first advance estimates of the GDP for FY20 by the government later in the day. The estimates will be keenly watched for as the economic turbulence has taken a toll on growth numbers in the first and the second quarter. Some support will come with Commerce and Industry Minister Piyush Goyal’s statement that use of artificial intelligence (AI) in different forms can help achieve the target of making India a $5 trillion economy in the coming years. However, there may be some cautiousness amid concerns over fiscal deficit and CAD imbalances. A private report said that India's government is likely to cut spending for the current fiscal year by as much as Rs 2 lakh crore ($27.82 billion) as it faces one of the biggest tax shortfalls in recent year. It added that Asia's third largest economy, which is growing at its slowest pace in over six years because of lack of private investment, could be hurt further if the government cuts spending. There will be some buzz in the banking stocks with a report that starting the January-March quarter, banks will begin to see the impact of the Reserve Bank of India’s June 7 circular, in the form of higher provisioning for stressed accounts that have not found resolution thus far. Telecom stocks will be in focus as the telecom industry urged the government to facilitate funding for telecom companies at lower interest rates to help them reduce capital costs. There will be some reaction in non-bank finance companies (NBFCs) stocks with ICRA’s report indicating that infrastructure finance companies might have to brace for additional pressure on asset quality from exposure to renewable energy (RE) projects, which face rate risks.

The US markets ended in green on Monday as heavyweight technology companies led a rebound. Asian markets are trading mostly higher on Tuesday after surveys of service sectors out overnight showed an improvement in the United States, U.K. and EU.

Back home, Dalal Street headed for the worst performance on Monday, with Sensex and Nifty crashing nearly 2 per cent each. After a sluggish start, key indices traded in red terrain for the whole day, impacted by 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. Market participants also got cautious due to a report stating 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. Bears tighten their grip over the street in the second half of the trading session, on account of weak cues from global markets. Domestic sentiments remained pessimistic, amid reports that investors wealth tumbled by a whopping Rs 3.11 lakh crore in two successive sessions of decline in the equity market following escalation in tensions in the Middle East. Adding more anxiety among investors, economic think tank NIPFP said that states might be facing a consolidated revenue gap of up to Rs 1.23 lakh crore on account of withdrawal of compensation after the five-year GST transition period ends on June 30, 2022. Finally, the BSE Sensex fell 787.98 points or 1.90% to 40,676.63, while the CNX Nifty was down by 233.60 points or 1.91% to 11,993.05.