Markets likely to make gap-down opening on Monday

Indian markets ended 1.31 percent lower each to halt a three-day winning run on Friday amid weakness across global markets. Today, markets are likely to make a gap-down opening tracking a sell-off across global markets. Investor will be eyeing on retail inflation and wholesale inflation data to be out later in the day. Traders will be concerned as India’s industrial production growth slowed down for a fourth straight month in December to 0.4 per cent mainly due to a poor performance by the manufacturing sector. According to the data released by the National Statistical Office (NSO), the manufacturing sector, which constitutes 77.63 per cent of the Index of Industrial Production (IIP), contracted by 0.1 per cent in December. However, some support may come as the commerce ministry said exports of agricultural and processed food products through APEDA are expected to exceed the target of $23.7 billion in the current fiscal. Agricultural and Processed Food Products Export Development Authority (APEDA) is taking a series of steps such as promoting IT-enabled activities for ease of doing business in the promotion and development of exports from India. Traders may take note of a report by industry body CII has suggesting that India needs to adopt a multidimensional approach to take the country's merchandise exports to $1 trillion by 2030. The report recommends finalising free trade agreements with large markets, extending RoDTEP to all exports, attracting global firms and addressing domestic manufacturing issues to achieve the target. Besides, RBI data showed the country's foreign exchange reserves increased by $2.198 billion to $631.953 billion in the week ended February 4. There will be some reaction in edible oil industry stocks as India has cut its tax on crude palm oil (CPO) imports to 5% from 7.5%, as the world's biggest edible oil importer tries to rein in local prices of the commodity and help domestic refiners and consumers. Meanwhile, LIC filed a draft red herring prospectus (DRHP) over the weekend to float an IPO. Under the mega IPO, the government will sell five percent in the insurance major for an estimated Rs 63,000 crore through an offer for sale (OFS).

The US markets ended lower on Friday on rising worries over escalating Ukraine-Russia tensions and the prospect of a tightened interest rate hike timeline from the Fed in response to decades-high inflation. Asian markets are trading in red on Monday as warnings Russia could invade Ukraine at any time sent oil prices to seven-year peaks, boosted bonds.

Back home, halting a three-day winning streak, Indian equity benchmarks came under heavy selling pressure and settled with losses of over a percent on Friday. The markets had a weak start and selling accentuated throughout the session as Former Reserve Bank of India Governor D Subbarao said the concern today was that the low interest rates and the enormous liquidity available in the system could potentially disrupt financial stability. He added that the challenge for central banks and for the Reserve Bank of India was to juggle between maintain price stability, supporting growth and employment, preserving financial stability and all this in a globalised world. Some concern also came as Finance Minister Nirmala Sitharaman’s statement that the Indian economy suffered the biggest contraction due to the COVID-19 pandemic, but the government has been able to contain retail inflation at 6.2 percent. She also said that the Indian economy suffered Rs 9.57 lakh crore loss due to the pandemic, compared to a loss of Rs 2.12 lakh crore during the global meltdown in 2008-09. Market participants overlooked Union Revenue Secretary Tarun Bajaj’s statement the country's fiscal deficit will come down once revenues start to grow. He said that the government had adopted a loose fiscal policy on the backdrop of increased capital expenditure. Traders also paid no heed towards RBI report that the consumer confidence has shown gradual improvement for the third successive round of the survey. The Reserve Bank of India (RBI) said the current situation index (CSI) increased marginally on the back of better sentiments on general economic situation, household income and spending. Meanwhile, the Reserve Bank of India (RBI) Governor Shaktikanta Das has urged banks and NBFCs to continue the process of augmentation of capital and building up of appropriate buffers to meet future uncertainties. Finally, the BSE Sensex fell 773.11 points or 1.31% to 58,152.92 and the CNX Nifty was down by 231.10 points or 1.31% to 17,374.75.