Markets to make a gap-down start on feeble global cues

The Indian markets swaying to the global cues turned considerably lower in last session, with the benchmarks suffering cuts of around two percent for the day. Today, the start of the new F&O series is likely to be a somber one following the feeble global cues. Traders will also be concerned with government’s statement that implementation of new pay scales recommended by the 7th Pay Commission is estimated to put an additional burden of Rs 1.02 lakh crore, or 0.7 percent of GDP, on the exchequer in 2016-17. The burden on pay head would increase by Rs 39,100 crore to about Rs 2.83 lakh crore in the current fiscal. However, there will be some solace to the markets too, which may help in some recovery in latter trade, a UN report for the Asia-Pacific has said that Indian economy is projected to expand by 7.6 percent in 2016-17 and accelerate to 7.8 percent in 2017-18, mainly on the back of domestic consumption demand aided by steady employment and a relatively low inflation. There will be some buzz in the textile and apparel stocks, as a World Bank report has said that rising wages in China presents a huge opportunity to the apparel sector in India with a possibility of creating up to 1.2 million jobs in the country.

There will be lots of important earnings announcements, to keep the markets in action. IDFC, ICICI Bank, Cholamandalam Investment and Finance Company, InterGlobe Aviation, Marico, Ajanta Pharma, Atul, Oberoi Realty, Marico, SBBJ and UPL will be reporting their earnings today.

The US markets witnessed a sharp sell-off in the last session, with the Nasdaq pulling back to its lowest closing level in a month. Negative sentiments into the markets was generated by billionaire investor Carl Icahn selling its stake in Apple and was followed by Commerce Department report showing US economic growth slowed by more than anticipated in the first quarter. The Asian markets have made a weak start led by the Japanese market which is down by over three percent, as the yen climbed to its 18 months high after BOJs surprise decision to refrain from adding to record monetary stimulus on Thursday.

Back home, Thursday’s session turned out to be a big disappointment for the Indian equity indices which crumbled like a ‘house of cards’ and went on to breach various key technical levels in the over one and half percent freefall. Sentiments came under pressure as most Asian markets turned negative despite starting on an optimistic note after the Bank of Japan (BoJ) refrained from adding to its monetary policy stance when most economists were expecting further stimulus. The Bank kept its bond-buying programme at 80 trillion yen ($733 billion) a year and made no changes to its negative-interest rate or its programme for purchasing exchange-traded funds. On the domestic front, sentiments were undermined by the Fitch ratings’ report that indicate the rapid rise in private-sector debt in emerging markets (EMs), particularly in foreign currency, has increased risks to their economies at a time of heightened global uncertainty. Furthermore, with industrial recovery not yet on the horizon, India Ratings of the Fitch Group said it was lowering its growth forecast for the country to 7.7 percent from 7.9 percent.  According to the report, the industrial recovery continues to be weak and fragile and this is getting reflected in the monthly Index of Industrial Production (IIP) data. IIP in fiscal 2015-16 till February has grown by just 2.6 percent. Investors failed to get relief with the report that foreign direct investment (FDI) into the country increased 37 percent after the launch of 'Make in India' programme till February this year. The overseas inflows grew 29 percent during the period compared to the 15-month period prior to the launch. On the global front, Asian markets gave up their early gains and ended lower, the selling pressure continued into the European markets too. Back home, after getting sluggish start, the local benchmark indices showed some strength in early trades, but the sentiments turned pessimistic in late morning trades and indices started drifting lower,  on absence of positive triggers which could take the markets higher and profit booking in frontline blue-chip stocks amid weak cues from Asian markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. Finally, the BSE Sensex plunged by 461.02 points or 1.77% to 25603.10, while the CNX Nifty dropped 132.65 points or 1.66% to 7,847.25.