Markets likely to make cautious start on Wednesday

Indian equity markets ended near fresh record highs on Tuesday after RBI said India recorded a current account surplus of $5.7 billion or 0.6 per cent of GDP in the March quarter. Today, markets are likely to make cautious start as private report said a sluggish monsoon leading to subpar kharif sowing could queer the pitch further for food inflation, which already remains elevated. Traders may also be cautious as the Reserve Bank of India said India’s external debt at the end of March 2024 was placed at $663.8 billion, an increase of $39.7 billion from its level at end-March 2023. If the valuation effect were excluded, external debt would have increased by $48.4 billion instead of $ 39.7 billion. However, some respite may come later in the day as Shaktikanta Das, Reserve Bank of India Governor, said India is at the threshold of a major structural shift in its growth trajectory. He added that India is moving ahead towards 8 per cent GDP growth in a sustained manner, adding that the average growth India recorded in the last three years is 8.3 per cent. Meanwhile, Reserve Bank of India in its data said that India’s financial position with the rest of the world improved over the year. The country increased its overseas assets more than it increased its foreign liabilities, largely due to a rise in reserve assets. During the financial year 2023-24, the net claims of non-residents on India decreased by $5.5 billion. This happened because India’s external financial assets grew by $109.8 billion, which was more than the increase in its external financial liabilities, which grew by $104.3 billion. There will be some action in defence industry related stocks as CRISIL Ratings in its latest report said that the revenue of private defence companies is set to grow by 20 per cent during the current financial year 2024-25. The report stated that the revenue of the 25 private aerospace and defence companies will surge by 20 per cent to approximately Rs 13,500 crore during the current fiscal year. The surge is propelled by higher government spending and concerted efforts by the government to encourage private participation in the defence sector.

On the global front, Asian markets are trading mostly in green in early deals on Wednesday despite Australia’s inflation rate climbed for a third straight month and semiconductor-related stocks jumped. The US markets ended mostly higher on Tuesday amid Nvidia rallied nearly 7 percent, rebounding after recent losses. 

Back home, Indian equity benchmarks witnessed a sharp up-move to hit fresh record closing highs on Tuesday, tracking firm trends in Asian markets and buying in Banking, IT and TECK stocks. After opening with a positive note, markets shifted into intraday range movement till mid part of the session. Traders took support with the Reserve Bank of India (RBI) stating that India recorded a current account surplus of $5.7 billion or 0.6 per cent of GDP in the March quarter. In the year-ago period, the current account deficit stood at $1.3 billion or 0.2 per cent of GDP. It added for FY24, the current account deficit narrowed to $23.2 billion or 0.7 per cent of GDP against $67 billion or 2 per cent of GDP in FY23. Traders took a note of RBI MPC member Jayanth R Varma’s statement that with retail inflation nearing the RBI’s target of 4 per cent, the monetary policy needs to shift focus on promoting growth. He further said CPI inflation in 2024-25 is projected to be only about 0.5 percentage point above target, and core inflation is extremely benign. The upside momentum got strengthened in the afternoon to later part and markets closed near the day’s highs. Sentiments remained up-beat with CRISIL Ratings’ report stating that capital goods makers are likely to see revenue rise 9-11% in fiscal 2025, led by continued significant outlays towards railways (including metros), defence, conventional and renewable sectors. This compares with an expected around 13% growth in fiscal 2024. Some solace also came as US envoy to India, Eric Garcetti stated that the relationship between India and the United States has reached unprecedented heights. Garcetti described the relationship as not just 'additive' but 'multiplicative'. Finally, the BSE Sensex rose 712.44 points or 0.92% to 78,053.52, and the CNX Nifty was up by 183.45 points or 0.78% points to 23,721.30.