Markets likely to get positive start tracking gains in global peers

Indian markets ended in negative territory on Tuesday, dragged by heavyweights like HDFC Bank and BPCL. Today, the markets are likely to get positive start, after previous session’s sell-off, tracking gains in global peers. Investors will be eyeing wholesale inflation data to be out later in the day for more directional cues. Traders may take note of report that India and the US have signed a landmark agreement that provides a framework for both sides to explore cooperation in the micro, small and medium enterprises (MSME) sector. External Affairs Ministry Spokesperson Randhir Jaiswal said the Memorandum of Understanding (MoU) would enable MSMEs of the two countries to foster trade. Besides, a CRISIL report said that as the economic landscape in India continues to shine with optimism, Indian companies are increasingly turning their gaze towards international markets, seeking new avenues for growth. However, some volatility may come in the markets amid the weekly Nifty and Bank Nifty expiry along with the mid-week trading holiday tomorrow (August 15) on account of Independence Day. Foreign fund outflows likely to weigh on domestic sentiments. On Tuesday, foreign institutional investors (FIIs) were net sellers of stocks to the tune of Rs 2,107.17 crore; thus far in August FIIs have net sold shares worth Rs 27,148.16 crore in the cash segment. There may be some cautiousness with a private report that the central bank is unlikely to consider softening rates this fiscal year even after the consumer inflation gauge declined below the mandated 4% target for the first time in five years, with economists attributing the fall to a statistical base effect and might not indicate a durable victory against sticky prices just yet. Power stocks will be in focus as an Icra report stated that the state-owned power distribution companies are facing financial constraints despite improving their aggregate technical and commercial losses. The agency has cited delays in realising payments from state government departments for power supply as one of the reasons for the constrain of discom finances and assigned a negative outlook for the power distribution segment. There may be some reaction in banking stocks as a research unit of CRISIL noted that the pace of growth in the revenue pool from corporate banking services for banks in India moderated to 4 per cent year-on-year in calendar year (CY) 2023, down from 15 per cent in CY 2022. It added cash management exhibited strong growth due to momentum from higher rates in 2023, this business is expected to temper somewhat as peak rates level off. Investors continue to keep close eye on earnings reactions of the many companies, including Aarti Drugs, Bajaj Healthcare, Glenmark Pharmaceuticals, Hindustan Aeronautics, and Ola Electric Mobility.

The US markets ended higher on Tuesday and hit a near two-week high after softer producer prices data reinforced bets of an interest-rate cut by the Federal Reserve in September. Asian markets are trading mostly in red on Wednesday following overnight gains on Wall Street.

Back home, Tuesday turned out to be yet another lackluster day for Indian equity benchmarks, with both Sensex and Nifty ending lower by over 0.80% each, as investors waited for the release of key U.S. inflation readings this week that could influence the Fed's rate trajectory. A sharp surge in oil prices also weighed on markets after Ukraine said it has seized 1,000 sq km (386 square miles) of Russia's bordering Kursk region and Russian President, Vladimir Putin, vowed a ‘worthy response’ to the attack. Besides, the United States said it's preparing for significant attacks by Iran or its proxies against Israel as soon as this week. After a negative start, markets remained lower for the whole day, amid mixed macro-economic data. The government data showed that the index of industrial production (IIP) declined to a three-month low of 4.2 per cent in June from the upward revised figure of 6.2 per cent in the preceding month. Losses were limited in the first half of the trading session, as India’s retail inflation rate, based on the consumer price index (CPI), in July fell below the RBI’s medium-term target of 4 per cent for the first time since August 2019 on the back of a high base and sharp reduction in food prices. CPI decelerated to 3.54 per cent in July as against 5.08 in the preceding month and 7.44 per cent during the same month a year ago. However, the Dalal Street witnessed more intensified selling in late noon deals to end near day’s low points, impacted by weak cues from European markets. Traders got cautious, as SBI Report stated that the CPI inflation down, but road ahead could be bumpy. Investors also remained cautious as a forecast by the Export-Import Bank of India (Exim Bank) showed that India’s merchandise exports growth may slow to 4.2 per cent year-on-year (Y-o-Y) in the September quarter of 2024-25 (FY25), down from 5.8 per cent in the June quarter. Finally, the BSE Sensex fell 692.89 points or 0.87% to 78,956.03, and the CNX Nifty was down by 208.00 points or 0.85% points to 24,139.00.