Markets likely to get negative start amid weak global cues

Indian markets ended slightly lower on Friday, tracking sluggish cues from other Asian and European markets. Today, markets are likely to get negative start amid weak global cues. Foreign fund outflows likely to dent sentiments. On June 21, foreign institutional investors (FIIs) sold shares amounting to Rs 1,790.19 crore. Also, reports of alleged irregularities in investment-related activities by fund managers at Quant Mutual Fund are likely to weigh on the trading sentiment. As per sources, Sebi officials last week conducted searches at Quant MF office, which has around Rs 80,000 crore in assets under management (AUM). Traders will be concerned as the Reserve Bank said India's forex reserves dropped by $2.922 billion to $652.895 billion for the week ended June 14. In the previous reporting week, the kitty had jumped by $4.307 billion to $655.817 billion, a new all-time high after consecutive weeks of increase in the reserves. There will be some buzz in the e-commerce sector stocks as in a bid to boost India's e-commerce exports, the Directorate General of Foreign Trade (DGFT) is working with the Department of Revenue to establish designated e-commerce hubs across the country to streamline the process for online export shipments. Some cautiousness will come as data released by the Ministry of Labour & Employment showed that the retail inflation for agricultural labourers (CPI-AL) and rural workers (CPI-RL) remained almost unchanged at 7 per cent and 7.02 per cent respectively in May 2024. Meanwhile, traders may take note of report that the GST Council, convened for its 53rd meeting, has introduced sweeping reforms aimed at simplifying tax compliance and easing the burden on taxpayers. Key among these is the decision to amend tax rates on items like student accommodation services and solar cookers. Stocks related to electronic components industry likely to remain in focus as a CII report said that demand for electronic components and sub-assemblies is estimated to grow over five-fold to $240 billion by 2030, including some of the key parts like motherboard, lithium ion batteries, camera module etc that are largely imported. The report recommends the government to come up with revised electronic components production-linked incentive schemes with higher incentives in the range of 35-40 per cent to reduce dependence on imports. There will be some reaction in oil and gas sector stocks as latest analysis from Fitch Ratings showed that India’s oil and gas sector is poised for a nuanced fiscal performance in FY24, with anticipated declines in downstream profits contrasting with robust upstream growth. In the primary market, Four SME IPOs will be opening for subscription today – Mason Infratech, Sylvan Plyboard (India), Visaman Global Sales and Shivalic Power Control. 

The US markets ended mostly in red on Friday amid profit-taking in tech shares, mainly Nvidia. Asian markets are trading mostly lower on Monday with Chinese markets leading losses on the prospect of a trade war with the European Union, while anticipation of key U.S. inflation data also kept sentiment on edge.

Back home, Indian equity benchmarks ended lower in the highly volatile session on Friday as investors partially booked profit owing to bearish trend in global markets. Markets started on a positive note amid foreign fund inflows. Foreign institutional investors (FIIs) were net buyers for the fourth straight day on Thursday. FIIs net bought stocks worth Rs 415.30 crore on June 20. Traders also took some support with RBI Governor Shaktikanta Das’ statement that the Indian financial system is in a much stronger position, characterised by robust capital adequacy, low levels of non-performing assets, and healthy profitability of banks and non-banking lenders. However, markets soon wiped-out initial gains and slipped into red as traders turned cautious with a report by the United Nations Conference on Trade and Development (UNCTAD) stating that Foreign Direct Investment (FDI) flows to India plummeted by 43 per cent in 2023 to $28 billion amid a global decline of 2 per cent. Sentiments remained lackluster in second half of trading session, amid weakness in Oil & Gas, FMCG and Energy shares. Traders paid no heed towards report stated that the headline HSBC Flash India Composite Output Index - a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors - increased from 60.5 in May to 60.9 in June. Though, the fall was more severe in the mid-session, markets pared some losses towards the end as some optimism remained among traders with the latest monthly payroll data released by the Employees’ Provident Fund Organisation (EPFO) showing that the number of fresh formal jobs generated in a month increased to a seven-month high in April, signalling a recovery in the formal labour market in the country.  Finally, the BSE Sensex fell 269.03 points or 0.35% to 77,209.90, and the CNX Nifty was down by 65.90 points or 0.28% points to 23,501.10.