Domestic indices likely to start holiday shortened week in red

Indian benchmarks ended marginally positive on Friday after the RBI raised the key policy rate by 50 bps. Today, the indices are likely to start holiday shortened week in red amid weak global cues. Markets will remain closed on Tuesday for Muharram. Investors will be eyeing macro-economic data -- CPI and IIP – to be out later in the week that is on August 12. However, some support may come later in the day as Sebi constituted an expert group of foreign portfolio investors (FPIs) to boost overseas flows into the country. FIIs net bought worth Rs. 1605.81 crore of shares on August 5. Traders may take note of Reserve Bank Governor Shaktikanta Das' statement that India is unlikely to be impacted by any adverse developments in Taiwan. The Governor said Taiwan accounts for only 0.7 per cent of India's overall trade and the capital flows from the island are also not very high. Meanwhile, market regulator Sebi has come up with a new framework that will prevent company insiders from dealing in shares during the closure of the trading window. Auto stocks will be in limelight as automobile dealer's body FADA President Vinkesh Gulati said he expects the festive season this year to be the best in terms of passenger vehicle sales on the back of new launches and improved production activity.  There will be some buzz in sugar industry stocks as the government relaxed the quantitative restriction of 10 million tonnes on sugar exports and allowed shipments of an additional 1.2 million tonnes in the current marketing year ending September. Aviation industry stocks will be in focus as Union minister Jyotiraditya Scindia said The country's civil aviation sector is poised for a phenomenal and healthy growth in terms of passengers, aircraft and airports, with the number of air travellers projected to touch 40 crore by 2027. There will be some reaction in travel and tourism industry stocks with a private report that outbound trips from India will surpass $42 billion by 2024 and the government could bring about certain policy changes to boost this growing market. Last batch of India Inc's June quarter earnings will also guide markets, with companies like Bharti Airtel, Adani Ports, and Power Grid will report their June quarter results (Q1FY22) later in the day.

The US markets closed mostly lower on Friday, weighed down by Tesla and other technology-related stocks after a solid jobs report torpedoed recent optimism that the Federal Reserve might let up its aggressive campaign to reign in decades-high inflation. Asian markets are trading mostly in red on Monday as Treasury yields climbed amid expectations of further aggressive Federal Reserve interest-rate hikes to tackle elevated inflation.

Back home, Indian equity benchmarks ended modestly higher on Friday led by gains in Telecom, Basic Materials and TECK stocks. Key gauges made positive start and stayed in green for most part of the day, as exchange data showed foreign institutional investors (FIIs) remained net buyers in the capital markets as they bought shares worth Rs 1,474.77 crore on Thursday. Buying further crept in after the Reserve Bank of India (RBI) raised the benchmark lending rate by 50 basis points to 5.40 per cent to tame inflation. It has also retained its FY23 gross domestic product (GDP) growth forecast at 7.2%. RBI Governor said that FPIs after remaining in exit mode in first quarter have turned positive in July. Besides, the RBI retained its retail inflation forecast for current fiscal year at 6.7 per cent amid geopolitical developments and higher global commodity prices, hoping inflationary pressures to ease further. Some optimism also came with private report stated that upgrading labour laws, simplifying taxation and creating a stable tariff environment are imperatives to facilitate a larger trade between India and the world. However, key indices trimmed most of their gains in late afternoon trade, as traders remained cautious after the report by the SBI Research Ecowrap stating that India's fiscal deficit in the current financial year is expected to come around 6.5 per cent, as against the budget estimate of 6.4 per cent. Some concern also came after the price of cooking gas piped to household kitchens in the national capital and adjoining cities was hiked by Rs 2.63 per unit on Friday, the second increase in rates in less than two weeks. Meanwhile, Commerce and industry minister Piyush Goyal is likely to meet export promotion councils on Friday to discuss the country's export performance, targets and various trade agreements India is currently negotiating. Finally, the BSE Sensex rose 89.13 points or 0.15% to 58,387.93 and the CNX Nifty was up by 15.50 points or 0.09% to 17,397.50.