Markets likely to make positive start; Services PMI data eyed

Indian markets ended with cut of around 6% on Tuesday following the BJP-led NDA's underwhelming performance in the 2024 Lok Sabha elections, falling short of market expectations. Today, markets are likely to make positive start after yesterday’s sell-off and following overnight gains on Wall Street. Fall in crude oil prices overnight likely to aid domestic sentiments. Some support will come with a private report that India's world record beating economic growth rate together with robust tax revenues, a fast expanding digital and financial infrastructure and a strong manufacturing sector will give the new government a base for unleashing next generation reforms that may make the country a developed nation by 2047. Market participants will be eyeing the Services PMI data to out later in the day for more directional cues. Investors will be also looking ahead to the Reserve Bank of India’s Monetary Policy Committee three-day meeting, which will kick start on June 5, in the immediate backdrop of Lok Sabha election results. RBI Governor Shaktikanta Das will announce the committee’s decision on interest rates on June 7. However, there may be some volatility in the markets after outcome of the Lok Sabha 2024 elections. According to reports, the Bharatiya Janata Party (BJP)-led NDA secured 292 seats, while the INDIA Alliance won 234 seats. Other parties managed to secure 17 seats. There may be some cautiousness amid foreign fund outflows. A huge selling was seen from foreign institutional investors (FIIs) on June 4 as they sold Indian equities worth Rs 12,436.22 crore. Moreover, Capital markets regulator Sebi said it has set up a committee to review the ownership and economic structure of clearing corporations and suggest measures to ensure that clearing corporations function as resilient, independent, and neutral risk managers. Telecom stocks will be in focus after the department of telecommunications (DoT) postponed the spectrum auction by 19 days to June 25. This is the second rescheduling of the auction, after it was pushed from May 20 to June 6. Meanwhile, the Central Board of Indirect Taxes and Custom (CBIC) has come out with a draft Central Excise Bill, 2024, which seeks to replace the eight-decade old Central Excise Act, 1944. The move could pave the way for petroleum products to come under the ambit of Goods and Services Tax (GST).

The US markets ended higher on Tuesday following softer-than-expected labor market data that reaffirmed expectations of an interest rate cut by the Federal Reserve. Asian markets are trading mixed on Wednesday in anticipation of Australia's GDP numbers. 

Back home, Indian equity benchmarks plunged sharply on Tuesday, losing nearly 6 percent in the session, after the counting of votes showed Prime Minister Narendra Modi's BJP-led NDA alliance past the majority mark but not registering a landslide victory as predicted by most exit polls. After an initial drop, the markets continued to decline, as traders remained cautious as S&P Global Market Intelligence asserts that weak private consumption in India remains the largest concern, with rural demand in particular still straggling to catch up, at a time when the country's overall growth remains strong. For the second consecutive quarter, India's real GDP growth exceeded most forecasts, bringing the full financial year 2023-24 growth to 8.2 per cent. With this, India maintains its status of the world's fastest-growing large economy. Market made some recovery in second half of the day after hitting intraday lows as traders opted to buy beaten down but fundamentally strong stocks. Though, the recovery was not enough to cut most of the losses and key gauges ended with a massive cut of around 6%. Anxiety also came as credit rating agency India Ratings and Research (Ind-Ra) in its latest report has predicted that FY24 was a bittersweet year for the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC), with the average resolution time jumping to a four-year high and the recovery levels at their lowest for corporate debtors (CDs) and financial creditors (FCs) in the past four years.  Traders overlooked a private report stating that strong growth and a narrower fiscal deficit can lead to a sovereign rating upgrade for India. It said the government's commitments on fiscal deficit to 5.1 per cent in FY25 and further down to 4.5 per cent in FY26 look more credible now, and pointed out that the number came in at 5.6 per cent in FY24 as against the budgeted 5.8 per cent. Finally, the BSE Sensex fell 4389.73 points or 5.74% to 72,079.05, and the CNX Nifty was down by 1,379.40 points or 5.93% points to 21,884.50.