Markets likely to get optimistic start amid strong pullback in global shares

Indian markets settled in negative territory on Thursday after the Reserve Bank of India's Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, decided to keep the repo rate unchanged at 6.5 per cent for the ninth consecutive time. Today, markets are likely to get optimistic start amid a strong pullback in global shares as fears of a likely US recession receded. Some support will come as the Reserve Bank of India said India's current account deficit (CAD)- excess of imports of goods and services over exports, would be manageable. Besides, capital markets regulator Sebi has proposed a revised format for filing compliance reports by Foreign Venture Capital Investors with regard to their activities. Under the rule, Foreign Venture Capital Investors (FVCI) are required to provide quarterly reports to Sebi in the format specified with respect to their venture capital activities. However, foreign fund outflows likely to dent sentiments. On Thursday, foreign institutional investors (FIIs) net sold stocks to the tune of Rs 2,626.73 crore; thus taking the monthly net sales across the Rs 20,000 crore mark in August. There may be some cautiousness as the Reserve Bank's household inflation expectation survey indicates that Indian households have turned hawkish on inflation compared to their perception in May this year. Stocks related to garment industry will be in limelight with a CareEdge report that India can be a beneficiary in the international readymade garment markets as Bangladesh, the world's second-largest exporter in the sector, grapples with economic challenges, amid ongoing political unrest there. As per the report, India could gain monthly export orders worth $200-250 million in the short term. There will be some buzz in the logistic stocks as Union Minister Nitin Gadkari said India's logistics cost will come down to 9 per cent of GDP by April next year. Gadkari further said the country's exports will also increase when the logistics cost comes down to single digit. FMCG sector stocks will be in focus with a private report that India’s fast-moving consumer goods sector (FMCG) grew 4 per cent by value in April-June over the same period last year and on the back of relaxed consumption patterns. As per the report, growth in volumes came in at 3.8 per cent. There will be some reaction in leather industry stocks as Union Commerce and Industry Minister Piyush Goyal asked the country's leather and footwear industry to target $50 billion in exports by 2030. Meanwhile, Ola Electric Mobility is set to be listed on the Mainboard, while Picture Post Studios and Afcom Holdings will debut on the SME market today.

The US markets ended higher on Thursday driven by new US labour market data that improved investor sentiment and eased recession concerns, which had emerged after a significant market sell-off earlier in the week. Asian markets are trading in green on Friday following positive momentum from Wall Street. 

Back home, Indian equity benchmarks struggled to maintain previous-session recovery and ended near day’s lows on Thursday due to losses in Metal, IT and Utilities stocks amid weak global cues. Key gauges made a negative start and stayed in red for most part of the day, as investors booked profits following the Reserve Bank of India's monetary policy committee (MPC) decision to kept the repo rate unchanged at 6.5 per cent for the ninth time in a row. The central bank maintained its hawkish stance due to persistently high food inflation. The RBI also keeps the gross domestic product (GDP) growth projection unchanged at 7.2 per cent for the financial year 2024-25 (FY25). Traders took a note of 16th Finance Commission chairman Arvind Panagariya’s statement that India needs to open its economy further, privatise banks and introduce factor market reforms to lift its growth beyond 6.5-7% levels. However, key gauges erased all of their initial losses and managed to trade in green in early afternoon deals, taking support from the Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that domestic economic activity continues to be resilient. On the supply side, steady progress in south-west monsoon, higher cumulative kharif sowing, and improving reservoir levels augur well for the kharif output. Some support also came as the Finance Bill 2024 was passed by Lok Sabha with a few amendments moved by the government. Finance Minister Nirmala Sitharman said the approach of the government has been to bring greater simplification of tax laws and procedures and enable growth and employment in the country. But markets failed to hold gains and fell sharply in late afternoon deals, as continuous foreign fund outflows and weak trend in the U.S markets drove domestic equities lower. According to exchange data, foreign institutional investors (FIIs) were net sellers in the capital markets on Wednesday as they offloaded shares worth Rs 3,314.76 crore. Finally, the BSE Sensex fell 581.79 points or 0.73% to 78,886.22, and the CNX Nifty was down by 180.50 points or 0.74% points to 24,117.00.