Markets likely to get positive start amid easing retail inflation

Indian markets ended volatile session in green terrain on Wednesday ahead of macro-economic data. Today, markets are likely to get positive start tracking gains in global markets and mixed macro-economic data on the domestic front. Consumer Price Index (CPI)-based headline retail inflation eased to a 12-month low of 4.75 per cent in May on the back of a softening core and fuel inflation. Separately, the Index of Industrial Production (IIP) also moderated to 5 per cent in April from an upwardly revised figure of 5.4 per cent in the preceding month. Foreign fund inflows likely to aid domestic sentiments. Foreign institutional investors (FIIs) were net buyers of stocks worth Rs 427 crore on June 12. Traders may take note of ICRA Executive Vice President and Chief Ratings Officer K Ravichandran’ statement that the PLI scheme is expected to attract investments of Rs 3-4 trillion in the next four years and generate 200,000 jobs as large projects in sectors, including semiconductor, solar module and pharmaceutical intermediaries, are expected to take off. He said that going ahead private sector capex is expected to pick up in oil and gas, metals and mining, hospitals, healthcare and cement sectors. However, there may be some volatility in the markets ahead of weekly options related expiry later in the day. There may be some cautiousness with a report that the country's outward foreign direct investment (FDI) commitments were almost flat at $2 billion in May 2024, compared to $1.98 billion in May 2023. According to the Reserve Bank of India (RBI) data, sequentially, FDI commitments were down from $2.78 billion in April 2024. There will be some buzz in the banking sector stocks as global rating agency Moody's said the pace of credit growth of commercial banks in India is expected to moderate in the current financial year (FY25) to 12-14 per cent due to challenges in raising resources and regulatory concerns on unsecured credit. It added that the moderation of credit growth will be faced by the non-banking finance companies also. Insurance industry stocks will be in focus as regulator Insurance Regulatory and Development Authority of India (Irdai) mandated insurance companies to provide loans on policies across all life insurance savings products, enabling policyholders to meet liquidity requirements. There will be some reaction in metal industry stocks as provisional government data reportedly showed that India's finished steel imports touched a five-year high in the first two months of the fiscal year that began in April, with the country continuing to be a net importer. Steel demand has been buoyant in India, the world's second-biggest crude steel producer, as the country remained a bright spot globally with robust demand from its construction and automotive sectors.

The US markets ended mostly higher on Wednesday following the Federal Reserve’s decision to hold interest rate steady and a May consumer inflation data that came in cooler than expected. Asian markets are trading mostly in green on Thursday after the U.S. Federal Reserve held the Federal Funds rate at 5.25% to 5.5% and shifted its dot plot to project only one rate cut this year.

Back home, Indian equity benchmarks erased most of their initial gains but managed to end in green on Wednesday, led by gains in Industrials, Power and Capital Goods stocks. Markets made an optimistic start and extended gains as the day progressed as traders took encouragement with a World Bank report stating that India will remain the fastest-growing major economy recording a steady growth of 6.7 per cent in the next three years including the current financial year. Sentiments remained up-beat as data of the commerce ministry showed exports from special economic zones (SEZs) rose by over 4 per cent to $163.69 billion in 2023-24 even though the country's total shipments dipped by more than 3 per cent in the last fiscal. Exports from these zones stood at $157.24 billion in 2022-23 and $133 billion in 2021-22. Markets remained firm in afternoon deals, taking support from Union Minister Piyush Goyal’s statement that India is positioned in a sweet spot and it is the right time to convert challenges into opportunities. He also noted that the timely sharing of data and transparency in exports and imports will encourage investors to invest more confidently. Some comfort also came as a private survey report stated that India stands sixth globally for its employment outlook for the third quarter of 2024, with 30% of businesses planning to hire more staff over the next three months. However, markets trimmed most of their gains in final hour of trade as investors remained on sidelines ahead of the Index of Industrial Protection (IIP) and Consumer Price Index (CPI) data to be out later in the day for more directional cues. Besides, foreign institutional investors (FIIs) were net sellers of stocks worth Rs 111 crore on June 11. Finally, the BSE Sensex rose 149.98 points or 0.20% to 76,606.57, and the CNX Nifty was up by 58.10 points or 0.25% points to 23,322.95.