Domestic indices likely to get positive start on firm global cues

Indian markets hit fresh record highs for a second straight day amid buying in financial shares, but failed to hold the gains and ended flat with negative bias on Friday. Today, domestic indices are likely to get positive start tracking gains in Asian counterparts. Some support will come as the latest data published by the Reserve Bank of India showed that India’s forex reserves surged by $4.54 billion to $648.7 billion as of May 17, marking an all-time high. Traders may take note of the Finance Ministry’s report that the economic momentum in the April-June quarter of 2024-25 will continue with a likely boost in the merchandise exports as a result of supply chain resilience, while India’s macroeconomic buffers will help navigate through the risk of volatility in oil prices. Also, India’s domestic manufacturing sector is set to receive stronger external support in the upcoming months as investment in the sector to rise. According to the monthly economic review by the Ministry of Finance, a growing number of organizations in the US and Europe are focusing on reindustrialization. These organizations are primarily aiming to enhance supply chain resilience, a strategy that could significantly benefit India’s manufacturing firms as part of the China Plus One strategy. Meanwhile, the Securities and Exchange Board of India (SEBI) has introduced new regulations to govern the sharing of real-time share price data with third parties, including various online platforms. However, there may be some cautiousness with report that India has recorded a trade deficit, the difference between imports and exports, with nine of its top 10 trading partners, including China, Russia, Singapore, and Korea, in 2023-24. The data also showed that the deficit with China, Russia, Korea, and Hong Kong increased in the last fiscal compared to 2022-23, while the trade gap with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed. There will be some reaction in coffee industry stocks as the commerce ministry data showed that India's coffee exports rose by 12.22 per cent to $1.28 billion in 2023-24 on higher demand for Robusta coffee in the global markets. The country exported coffee worth $1.14 billion in 2022-23. Stocks related to solar power industry will be in limelight with a private report that India achieved a milestone by adding over 10 GW of solar capacity in the first quarter (Q1) of 2024, marking the highest quarterly installation to date. As per the report, this figure represents an almost 400 per cent year-over-year (YoY) increase compared to the over 2 GW installed in Q1 2023. Moreover, shares of Adani Group are likely to be in focus after the BSE Sensex in its semi-annual revision included the Adani Ports in the Sensex 30, replacing Wipro with effect from June 24. Shares of Indian Renewable Energy Development Agency (Ireda), JSW Infrastructure and Tata Technologies will be in the limelight following their addition to the FTSE World index.

The US markets ended in green on Friday after upbeat economic data as investors positioned themselves ahead of the long U.S. Memorial Day weekend and the unofficial start to summer. Asian markets are trading mostly higher on Monday as investors braced for a busy week of data which culminates in a key U.S. inflation report that could set the stage for a cut in interest rates there, albeit not for a few months yet.

Back home, Indian equity benchmarks ended flat with a negative bias in volatile session on Friday on profit booking at record-high levels amid weak global cues. Traders also remained on sidelines ahead of the results of the Lok Sabha polls announcement. Markets made a cautious start and oscillated between gains and losses throughout the day as traders got anxious with report that India's engineering exports declined 3.2 per cent to $8.67 billion in April 2024, primarily due to lower shipments of metals, especially iron, steel and copper. The lower shipment of steel was mainly witnessed in Italy, Nepal, the UAE, the Netherlands, the USA, China, and South Korea, among others. Some cautiousness also came with another report stating that investments by private equity (PE) and venture capital (VC) funds declined by 35 per cent to $4.4 billion in April compared with $6.8 billion in the year-ago period. It said PE/VC investors continue to remain cautious due to global uncertainties, geopolitical tensions, and the ongoing Indian general elections. However, traders took some support with S&P Global Rating analyst’s statement that India can get rating support over time if it utilises the highest-ever dividend of over Rs 2.11 trillion received from the Reserve Bank to reduce fiscal deficit.  The RBI board has decided to pay a record Rs 2.11 trillion dividend to the government for the fiscal ended March 2024, more than double of what was budgeted expectation of Rs 1.02 trillion. Some support came amid foreign fund inflows. Foreign institutional investors turned buyers on May 23 as they bought Indian equities worth Rs 4,670.95 crore. Traders took a note of an industry body, the Indian Staffing Federation’s (ISF) statement that India should consider lowering the 18% tax imposed on recruitment agencies for providing outsourced staff to big companies, which could help boost employment and wages of contract workers. Finally, the BSE Sensex fell 7.65 points or 0.01% to 75,410.39, and the CNX Nifty was down by 10.55 points or 0.05% points to 22,957.10.