Markets likely to get flat-to-positive start on Wednesday

Indian markets finished a volatile session barely in the green on Tuesday, as gains in heavyweights such as Hindustan Unilever, Asian Paints and SBI were offset by losses in the HDFC twins and Infosys. Today, markets are likely to get flat-to-positive start amid mixed global cues. Investors will be eyeing the services PMI data to be out later in the day. Traders will be taking encouragement with Centre for Monitoring Indian Economy (CMIE) data showing that the country's unemployment rate fell from 7.80 per cent in June to 6.80 per cent in July, the lowest level in the last six months, amid rising agriculture activities during monsoon. Some support will come with a private report that the corporate earnings growth during the first quarter of the current fiscal is largely led by the banking, financial services and insurance (BFSI) sector and also helped by credit cost moderation. However, there may be some cautiousness as India’s trade deficit widened to a record $31 billion in July with a sequential decline in exports and somewhat flat imports owing to growing recessionary trends in developed economies and elevated commodity prices. The data released by the commerce ministry showed merchandise exports declined to a five-month low at $35.2 billion in July while imports eased sequentially to $66 billion. Meanwhile, the Reserve Bank of India (RBI) will commence their 3-day monetary policy meeting (MPC) on Wednesday, to mull rate hike trajectory. There are expectation of the rate hike to be in the range of 30 to 50 basis points. Oil & gas and aviation industry stocks will be in focus as the government increased the windfall tax on domestically produced crude to Rs 17,750 a tonne from Rs 17,000 a tonne earlier, a move that will hit producers like ONGC and Vedanta. Also, government lowered the export tax on diesel and aviation turbine fuel in line with softening international petroleum product prices. There will be some reaction in insurance industry stocks as the Insurance Regulatory and Development Authority of India (Irdai) proposed a single limit for the expenses of general and health insurance firms. This move is expected to bring relief to non-life insurers, especially private players. FMCG companies stocks will be in limelight with a private report that consumption of fast-moving consumer goods (FMCG) like packaged foods, beverages, and toiletries revived in the April-June quarter in urban markets but was negative in rural India as people opted for smaller packs. Investors awaited more of corporate earnings from India Inc.

The US markets ended lower on Tuesday on rising tensions between the US and China amid US House Speaker Nancy Pelosi‘s visit to Taiwan. Asian markets are trading mostly in green on Wednesday as hawkish comments from Fed officials prompted a jump in Treasury yields.

Back home, Indian equity benchmarks ended flat with positive bias after a volatile trading session on Tuesday led by gains in Indusind Bank, Asian Paints shares amid weak global trends. After making negative start, key indices extended losses in morning deals as sentiments remained dampened as private report stated that the Reserve Bank of India will deliver two more rate increases with the first of 25-30 bps later this week. Some concern also came as Crisil Research pegged the headline consumer price inflation to come at 6.8 per cent in FY23 - marginally higher than the Reserve Bank's 6.7 per cent estimate - because of the pressures on the food front, where the increase in prices has been double that of FY22. Market participants also remained on sidelines ahead of the Reserve Bank of India's (RBI) monetary policy decision on interest rates on August 05. However, markets erased all their losses and traded near neutral lines with positive bias in late afternoon session, taking support from finance minister Nirmala Sitharaman’s statement that India’s macroeconomic fundamentals are intact and there is no risk of the economy entering into recession or stagflation. She said the government is trying to keep inflation below 7%.  Some support also came as after Union Minister of State for Finance Pankaj Chaudhary said that as per provisional estimates released by National Statistical Office (NSO), Indian economy in 2021-22 has fully recovered the pre-pandemic real GDP level of 2019-20. Besides, exchange data showed, Foreign Institutional Investors (FIIs) were net buyers in the capital market on Monday, purchasing shares worth Rs 2,320.61 crore. Finally, the BSE Sensex rose 20.86 points or 0.04% to 58,136.36 and the CNX Nifty was up by 5.40 points or 0.03% to 17,345.45.