Markets likely to make weak start on Monday

Indian markets continued to decline for a second straight day on Friday, dragged by financial, IT and oil & gas shares. Today, the markets are likely to make weak start amid mixed Asian cues. During the week, IIP data and RBI Monetary policy are important events that market participants will watch out for. Traders will be concerned as rating agency Moody’s Investors Service said Indian economy’s fiscal strength is unlikely to improve in the medium term, thus remaining a key credit challenge compared with peers, even as the FY23 budget’s focus on capital expenditure will support near-term growth. Also, RBI data showed that the country’s foreign exchange reserves declined by $4.531 billion to stand at $629.755 billion in the week ended January 28. In the previous week ended January 21, the reserves had decreased by $678 million to $634.287 billion. It touched a lifetime high of $642.453 billion in the week ended September 3, 2021. There will be some cautiousness as with a private report that in view of inflationary concerns, the Reserve Bank is likely to maintain the status quo on key policy rates in its next bi-monthly economic policy, which will be the first after the presentation of the Union Budget for 2022-23. However, some support may come as Agriculture Minister Narendra Singh Tomar said the Centre has approved over 9,000 applications and sanctioned Rs 6,540 crore so far, for the development of agri-infra projects. Besides, Union Minister for Commerce and Industry Piyush Goyal termed the Union Budget 2022-23 as a direction-setting budget, addressing both macro-economic and micro-economic concerns and looking at an inclusive development. Traders may take note of report that Finance Minister Nirmala Sitharaman asked India Inc to invest in the economy so that the virtuous cycle kicks in. Referring to the government's decision to cut corporate tax rate, she said, the government has also opened up many sectors including atomic energy and space. Hotel industry stocks will be in focus as India Ratings and Research (Ind-Ra) said Covid-19's third wave is expected to have a benign impact on the hotel industry due to lesser restrictions along with the sector's pro-active preparation. Oil & gas, and aviation industry stocks will be in limelight as Finance Minister Nirmala Sitharaman said the Centre will move the issue of bringing aviation turbine fuel (ATF) under the GST net for discussion in the next meeting of the GST Council, as rising global fuel prices are a concern. Investors will be eyeing financial result for more clues. Meanwhile, Reserve Bank of India (RBI) announced rescheduling of rate-setting Monetary Policy Committee (MPC) meeting by a day in view of Maharashtra declaring public holiday on 7 February 2022 to mourn death of Bharat Ratna legendary singer Lata Mangeshkar. The meeting was scheduled for 7-9 February 2022. With the postponement, the meeting will now begin on February 8 and the outcome would be announced on February 10.

The US markets ended mostly higher on Friday after Amazon's positive earnings capped a run of mixed big tech numbers. Asian markets are trading mixed on Monday after strong US jobs data allayed concerns about the global economy though also added to the risk of aggressive tightening by the Fed.

Back home, Indian equity benchmarks ended a choppy session marginally lower on Friday, extending losses to a second straight day. The benchmark indices started on a muted note and remained volatile throughout the day with a bearish ton. Traders were cautious amid a private report stating that the Finance Ministry’s internal projections for what real gross domestic growth in FY23 could be, is lower than the 8-8.5 percent given out in the 2021-22 Economic Survey. Some pessimism also came with IMF Managing Director Kristalina Georgieva’s statement that it was too early to say if the world was facing a period of sustained inflation, but warned that failure to make economies more resilient to future shocks could lead to big problems. Traders took note of a private report that the Monetary Policy Committee (MPC) may go for a hike of up to 0.25 per cent in the reverse repo rate at which the RBI absorbs excess liquidity and leave the repo rate at which it lends, to narrow the policy rate corridor. However, losses remain capped as traders got some support with CBDT Chairman J B Mohapatra said direct tax collections are expected to breach the revised target of Rs 12.50 lakh crore and set an all-time high and 'historic' record by the end of this financial year in March. Some support also came in as economic think-tank NCAER said the business confidence has remained buoyant in the third quarter of the current financial year, though the pace of rise was moderated by a spurt in the number of COVID-19 cases in December 2021. Adding to the optimism, Commerce and Industries Minister Piyush Goyal said promoting exports through subsidies has not really given the desired results, but the government's RoDTEP scheme is helping grow exports which is expected to reach a record $400 billion this year. Finally, the BSE Sensex fell 143.20 points or 0.24% to 58,644.82 and the CNX Nifty was down by 43.90 points or 0.25% to 17,516.30.