Markets likely to get cautious start amid Hindenburg-SEBI row

Indian markets ended higher on Friday, recovering some of the losses from earlier in the week, with IT stocks leading the rebound. Today, markets are likely to get cautious start amid Hindenburg-SEBI row, while firm global cues likely to lend some support to markets. Markets will track how investors read into the Hindenburg Group's latest accusations of conflict of interest against market regulator chairperson Madhabi Buch in the Adani Group case. On August 10, Hindenburg Research alleged SEBI chair Madhabi Puri Buch had a stake in offshore entities linked to the Adani case. SEBI has refuted allegations from Hindenburg Research suggesting that amendments to Real Estate Investment Trusts (REITs) regulations were intended to benefit major financial conglomerates such as Blackstone, calling the claim inappropriate. Investors will keep close eye on the consumer price index (CPI) based inflation data for July and Index Industrial Production (IIP) data for June will be released later in the day for more directional cues. Some cautiousness will come amid foreign fund outflows. After infusing money during the last two months, foreign investors have turned net sellers as they pulled out over Rs 13,400 crore from Indian equities in August so far due to unwinding of the yen carry trade and recession fears in the US. However, some support may come as the latest data from the Reserve Bank of India showed that India's foreign exchange reserves rose by $7.53 billion to a new record high of $674.91 billion for the week ended August 2. The total reserves increased on the back of a rise in foreign currency assets, which rose by $5.16 billion to $592.03 billion during the week. Traders may take note of Minister of State for Commerce and Industry Jitin Prasada’s statement that foreign direct investment inflows in the manufacturing sector during 2014-24 rose by 69 per cent to $165.1 billion. There will be some buzz in coal industry stocks as India's coal import rose by 5.7 per cent to 75.26 million tonnes (MT) in the first quarter of the current fiscal compared to 71.16 MT of coal in the same period of the previous fiscal. Stocks of lab-grown diamond industry likely to remain in focus as think tank GTRI said significant fall in prices, eroding consumer interest and competition with imports are some of the major challenges being faced by the domestic lab-grown diamond industry. It also said that while India faces the issue of production overcapacity, it continues to import lab-grown diamonds in large amounts and this issue needs deeper investigation. There will be some reaction in cement industry stocks with report that leading cement manufacturers reported single-digit volume growth in the June quarter, though their topline was muted on account of the continued downtrend in the price.

The US markets ended higher on Friday as stocks continued to recover from recent selling sparked by concerns about the outlook for the U.S. economy. Asian markets are trading mostly in green on Monday as a holiday in Japan removed one source of recent volatility, and investors hunkered down for major U.S. and Chinese economic data for an update on global growth prospects.

Back home, erasing the losses from the previous session, Indian equity benchmarks made a strong recovery on Friday and ended with gains of over a percent each, as buying activity intensified across all sectors. Markets made a positive start and stayed in green for whole day, following a rally in global equity markets as a larger-than-expected drop in U.S. unemployment claims eased recession fears in the world's largest economy. Traders also took support with the Reserve Bank of India (RBI) stating that India's current account deficit (CAD)- excess of imports of goods and services over exports, would be manageable. Traders took note of Reserve Bank Deputy Governor Michael Patra’s statement that household saving behaviour is returning to ‘normalcy’ now. Drawing from official data, he said there is not a lot of exposure to equities among the households. Sentiments remained up-beat in late afternoon deals, taking support from the Reserve Bank of India’s (RBI) latest survey report showing that households’ optimism on economic conditions for the year ahead remained in positive terrain, though it came down from the previous survey round.  In late afternoon session, investors continued to hunt for fundamentally strong stocks. Traders overlooked exchange data showing that Foreign Institutional Investors (FIIs) offloaded equities worth Rs 2,626.73 crore on Thursday.  Meanwhile, 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. Finally, the BSE Sensex rose 819.69 points or 1.04% to 79,705.91, and the CNX Nifty was up by 250.50 points or 1.04% points to 24,367.50.