Domestic indices likely to get weak start on Tuesday

Indian markets halted a winning run on Monday and ended lower dragged by losses in oil & gas, auto and financial shares though gains in metal stocks lent some support. Today, markets are likely to get a weak start amid volatile global sentiments ahead of the US Federal Reserve's rate action trajectory coupled with rise in crude oil prices overnight. Traders will be concerned as Minister of State for Finance Pankaj Chaudhary said the Central government's total liabilities are seen rising to Rs 155.33 lakh crore in FY23. This would represent an increase of 12 percent over the FY22 figure of Rs 138.88 lakh crore. The Centre is set to borrow a record Rs 14.95 lakh crore on a gross basis from the market through the issuance of bonds in FY23. Some cautiousness will come as foreign portfolio investors (FPIs) turned sellers of domestic stocks to the tune of Rs 844.78 crore, data available with NSE suggested. Besides, a Sebi-panel has cautioned the public against dealing in the properties of PACL Group and its subsidiaries, saying no one has been authorised to sell the properties. However, some support may come later in the day with a private report stating that India is poised to be the fastest-growing major economy in the world and an engine of global growth despite global headwinds. Traders may take note of Commerce Minister Piyush Goyal’s statement that India is on the path to become a $30 trillion economy in the next 30 years on the back strong GDP growth. He added that India is currently $3-3.5 trillion economy and soon will achieve $5 trillion. Meanwhile, Income Tax Department has said that more than 3 crore returns have been filed through e-filing portal till date for the financial year 2021-22. There will be some buzz in defence industry stocks as the government said India has received around Rs 494 crore of foreign direct investment in the defence sector since revising the policy relating to it in September 2020. Coffee industry stocks will be in focus with a private report that the Centre plans to repeal the existing 80-year old Coffee Act and has proposed a new Coffee (Promotion and Development Bill), 2022 to promote development of the Indian coffee industry. Investors awaited more of corporate earnings from India Inc for cues, with Asian Paints and Bajaj Auto due to report their numbers later in the day.

The US markets ended mostly higher on Monday as investors girded for an expected rate hike at a Fed meeting this week and earnings from several large-cap growth companies. Asian markets are trading mostly in green on Tuesday mirroring the trend on Wall Street overnight.

Back home, Indian equity benchmarks snapped their 6-day winning run and ended lower by over half percent on Monday dragged by Auto, Energy and Telecom shares. Markets made a weak start and stayed in red for whole day, as traders got anxious with a private report that Indian rupee may further depreciate to 82 to a dollar in the near term due to widening of trade deficit and expected aggressive rate hike by the US Fed later this week to tame record high inflation. The mood on the street remained cautious with India Ratings’ report stated that the banks are unlikely to take a big hit on profitability this quarter due to rising bond yields, which may eat up 5.3 per cent (Rs 11,790 crore) of their net income in the worst-case scenario. It also said that in the worst-case scenario, banks may see a profit erosion of 2.6 per cent of their pre-provisioning operating profit and 5.3 per cent of their post-tax profit from treasury losses in Q1. However, key indices managed to trim some losses in late afternoon deals, taking support from Finance Minister Nirmala Sitharaman’s statement that the trust-based taxation system introduced by the government has resulted in improved collections and increase in the number of return filings. Traders took note of Reserve Bank of India Governor Shaktikanta Das’ statement that the central bank will ensure that the economy has a soft landing wherein inflation is closer to 4 per cent, with minimal impact on growth. But, markets failed to hold recovery and ended lower, as India's foreign exchange (forex) reserves slumped by $7.541 billion to $572.712 billion for the week ended July 15, the lowest level in 20 months, as the Reserve Bank of India (RBI) likely used its war chest to defend the rupee, which recently dipped below 80 against a dollar. This is the second consecutive week of the sharp drop in the country's forex reserves. Some concern also came as the government is not considering extending the last date for filing income tax returns as it expects most returns to come in by the due date of July 31. Revenue Secretary Tarun Bajaj said over 2.3 crore income returns were filed by July 20 for fiscal 2021-22 and the numbers are picking up. Finally, the BSE Sensex fell 306.01 points or 0.55% to 55,766.22 and the CNX Nifty was down by 88.45 points or 0.53% to 16,631.00.