Markets likely to get flat-to-positive start amid lack of decisive triggers

Indian markets snapped three-day winning run and ended lower on Monday after hitting their all-time high levels in early trade amid selling in blue-chip IT stocks and HDFC Bank. Today, markets are likely to get flat-to-positive start amid lack of decisive triggers. Now, all eyes will be on budget. Back in saddle in signs of Prime Minister Narendra Modi preferring continuity in policy, Finance Minister Nirmala Sitharaman is likely to lay out the government's economic agenda when she presents the first annual budget of Modi 3.0 next month. Foreign fund inflows likely to aid sentiments. Foreign institutional investors (FIIs) extended their buying on the second day on June 10 as they bought Indian equities worth Rs 2,572.38 crore. Traders will be taking encouragement as in his first decision after taking charge for the third time, Prime Minister Narendra Modi signed a file transferring the 17th instalment of the PM-Kisan Samman Nidhi (PM-KISAN) fund, amounting to nearly Rs 20,000 crore, to around 9.3 crore farmers. Later in the day, in its first meeting, the Union cabinet under his leadership also approved government assistance for the construction of three crore houses under the Pradhan Mantri Awas Yojana (PMAY). Some support will come as Finance Ministry announced the release of an additional installment of tax devolution to states for June 2024, in a move to support state finances and spur economic development. The total amount released to states for June now stands at Rs 1,39,750 crore. Meanwhile, a private report indicated that the new coalition government is likely to stick to its medium fiscal consolidation roadmap, but with a tilt towards populism in its first budget post the elections. However, there may be some cautiousness with a private report that India consumer inflation likely snapped a four-month downward trend in May due to rapidly rising food costs, suggesting the Reserve Bank of India is still several months away from cutting interest rates. There will be some reaction in insurance industry stocks as Life Insurance Council’s data showed that the life insurance industry’s new business premium (NBP) increased by 15.5 per cent year-on-year (Y-o-Y) in May 2024, aided by growth across segments. The industry earned premiums worth Rs 27,034.2 crore in May 2024 compared to Rs 23,477.8 crore in the year-ago period.

The US markets ended higher on Monday although investors were cautious ahead of this week's consumer prices report and a Federal Reserve policy announcement. Asian markets are trading mixed on Tuesday as investors pondered fresh political uncertainty in European markets after right-wing gains in elections and a snap poll in France revived concerns about the cohesion of the bloc.

Back home, after hitting fresh highs in early trade cheering Narendra Modi’s continuation as the country’s Prime Minister for the third term, Indian equity benchmarks ended the trading session on a lower note on Monday. The start of day was in green, as traders took encouragement after USIBC President Atul Keshap said the swearing-in of Narendra Modi as the prime minister for a historic third consecutive term sends a strong message of political and economic stability amidst rising geostrategic uncertainty. Some optimism came as retail inflation for industrial workers eased to 3.87 per cent in April compared to 4.2 per cent in March this year.  But soon, indices turned volatile and altered between green and red, as some cautiousness came in after Fitch Ratings reportedly said that India’s medium-term fiscal consolidation, critical to any ratings upgrade, is likely to get more challenging as a new coalition government comes to power. Finally, indices ended in red, as investors got cautious, after the Reserve Bank of India (RBI) in its latest ‘Inflation Expectations Survey of Households (IESH) - May 2024’ has showed that Households’ inflation expectations for the three months and one year ahead periods increased by 20 basis points (bps) and 10 bps, respectively, but remained in single digits, while their perception on current inflation moderated by 10 bps and stood at 8.0 per cent in the latest survey round. Besides, a stronger-than-expected U.S. jobs report pushed Treasury yields higher and raised doubts about whether the Fed will be able to cut interest rates this year. Some concerns came with report stating that after having net sold stocks worth Rs 42,200 crore in the month of May, foreign institutional investors (FIIs) so far in June have net sold shares to the tune of Rs 13,718 crore. Finally, the BSE Sensex fell 203.28 points or 0.27% to 76,490.08, and the CNX Nifty was down by 30.95 points or 0.13% points to 23,259.20.