Benchmarks to make negative start on Wednesday

Indian markets settled at record highs on Tuesday as investors shrugged off data showing high retail inflation. Today, the markets are likely to make pessimistic start amid lackluster global cues. Investors will be eyeing Balance of Trade data for the month of December to be out later in the day. There will be some cautiousness with a private report that a spike in India's retail inflation in December has raised the chances that the Reserve Bank of India (RBI) will put rate cuts on hold for some time despite economic growth languishing at more than six-year lows. As per the report, the RBI's monetary policy committee (MPC) may even change its stance from accommodative to neutral at its February meeting. Traders may also take note of report that new FICCI President Sangita Reddy has urged the government not to worry too much about the fiscal deficit and try to pump the economy by increasing investments to arrest slowdown and accelerate growth. Besides, the government may impose anti-dumping duty on a Chinese medicine used to treat different kind of bacterial infections with a view to guard domestic players from cheap imports. The commerce ministry's investigation arm Directorate General of Trade Remedies (DGTR) has initiated a probe into an alleged dumping of Ciprofloxacin Hydrochloride from China. Meanwhile, according to the much awaited draft Rare Diseases Policy, the government will provide a financial support of up to Rs 15 lakh under its Rashtriya Arogaya Nidhi scheme for one-time treatment of rare diseases. There will be some buzz in the reality stocks with a joint report by Knight Frank-FICCI-Naredco stating that real estate sentiments in the country revived in December quarter and turned optimistic after two quarters on the back of several measures taken by the government and the RBI to boost demand. There will be some reaction in power stocks with the Central Electricity Authority data showing that India's annual electricity demand in 2019 grew at its slowest pace in six years with December marking a fifth straight month of decline. There will be some earnings announcements too to keep the markets buzzing.

The US markets ended mostly lower on Tuesday as traders seemed reluctant to make significant moves as they digested quarterly results from several big-name financial companies. All the Asian markets are trading in red on Wednesday as investors awaited the signing of an initial US-China trade deal, with sentiment somewhat dented by comments from the US Treasury Secretary that tariffs would remain in place for now.

Back home, Indian equity bourses hit yet another record closing highs on Tuesday, with Sensex and Nifty gaining over 0.20% each. The start of the day was sluggish, as India’s retail inflation based on Consumer Price Index (CPI) jumped to an over five-year high of 7.35% in December 2019. The CPI was 2.11% in December 2018 and 5.54% in November 2019. Traders remained pessimistic, amid reports that the deepening slowdown has it impact on the deal market in 2019 with mergers and acquisitions (M&As) plummeting over 34 per cent to $67.1 billion but still making it the second best, on the back of the $6-billion ArcelorMittal takeover of Essar Steel. Volatility persisted over the street for the most part of the session, after India’s Wholesale price index inflation also worsened to 2.59 percent in the month of December 2019 as against 0.58 percent for the previous month and 3.46 percent during the corresponding month of the previous year.  However, in the last leg of the trade, bourses staged sharp recovery to end higher, as the Reserve Bank of India remained a net purchaser of the US dollar in November, buying $6.928 billion from the spot market on a net basis. The RBI had bought $7.458 billion of the greenback and sold $530 million in the spot market in the reporting month. Finally, the BSE Sensex gained 92.94 points or 0.22% to 41,952.63, while the CNX Nifty was up by 32.75 points or 0.27% to 12,362.30.