Markets likely to get cautious start amid mixed cues from Asian peers

Indian markets marched higher to scale fresh lifetime closing peaks on Friday, tracking a largely firm trend in global markets and renewed foreign fund inflows amid the US rate cut hopes gathering momentum. Today, markets are likely to get cautious start amid mixed cues from Asian counterparts and investors will react to the India’s gross domestic product (GDP) data. The government data showed India’s economic growth slowed to a 15-month low of 6.7% in April-June 2024-25, mainly due to poor performance of the agriculture and services sectors. The GDP expanded by 8.2% in the April-June quarter of 2022-23. There will be some cautiousness as the growth in production of eight key infrastructure sectors slowed to 6.1%in July this year due to a decline in the output of crude oil and natural gas. The growth of core sectors was 8.5% in July 2023. However, sentiments may some support later in the day as the RBI said India’s forex reserves jumped by $7.023 billion to touch a new high of $681.688 billion in the week ended August 23. The overall reserves had jumped by $4.546 billion to $674.664 billion in the previous reporting week. Some support may come as Defence Minister Rajnath Singh stated that the Indian economy has now improved to Fabulous Five from the Fragile Five before 2014. The minister also added that the Indian economy is one of the fastest-growing large economies now. The minister also added that the government has taken various steps to improve the ease of doing business in the country. Traders may take note of the government data showing that fiscal deficit narrowed to 17.2 percent of the full year estimate in the first four months of the year, compared with 33.9 percent during similar period in the previous year, as spending remained contained due to elections. Meanwhile, investors will eye the release of HSBC manufacturing PMI for August, and market regulator Securities and Exchange Board of India's (Sebi) revisions in the F&O entry and exit regulations. Auto stocks will be in focus reacting to their monthly sales numbers. Also, Crisil Ratings asserted that the revenue growth of auto dealers is expected to slow to 7-9 per cent this financial year after a healthy 14 per cent last year, due to a moderation in sales volume growth and modest price hikes by car manufacturers. There will be some reaction in oil & gas, aviation sector stocks after the Union government slashed windfall tax on domestically produced crude oil by 11.9 percent to Rs 1,850 per tonne from previous Rs 2,100 per tonne, effective from August 31. Windfall tax on export of diesel and aviation turbine fuel (ATF) has been retained at nil. 

The US markets ended higher on Friday buoyed by US economic data that helped the dollar snap a weeks-long losing streak. Asian markets are trading mixed on Monday as investors focus on a packed week of economic data and assess China’s business activity figures released over the weekend.

Back home, the strong buying fuelled the momentum over the Dalal Street, with both Sensex and Nifty reaching fresh record closing highs, following U.S. economic data that eased growth concerns. Setting the stage for a strong trading session, indices marked fresh highs at the opening, driven by positive global trends and Moody's decision to raise India's 2024 GDP growth forecast to 7.2% from 6.8 per cent previously citing signs of improving rural demand. Also, growth for 2025 is pegged at 6.6 per cent versus 6.4 per cent. Besides, Fitch affirmed India's long-term foreign currency issuer rating at 'BBB-' with a stable outlook, citing a strong medium-term growth outlook. While market participants were eyeing India’s gross domestic product (GDP) and infrastructure output data to be released later in the day, indices were seen holding their ground in positive territory during the whole day. Domestic sentiments remained optimistic, as the retail inflation rates for farm and rural workers eased in the month of July, with the All-India Consumer Price Index for Agricultural Labourers (CPI-AL) and Rural Labourers (CPI-RL) falling to 6.17% and 6.20%, as compared to 7.43% and 7.26% in July 2023, respectively. The corresponding figures for June 2024 were 7.02% for CPI-AL and 7.04% for CPI-RL. On the sectoral front, sugar stocks buzzed as the government removed the cap on sugar diversion for ethanol production for ESY (Ethanol Supply Year - December to November) 2024-25. According to the government's notification, sugar mills and distilleries can produce ethanol from sugarcane juice/sugar syrup, B-Heavy molasses, as well as C-Heavy molasses, during ESY2024-25 as per their agreements with oil marketing companies. Finally, the BSE Sensex jumped 231.16 points or 0.28% to 82,365.77, and the CNX Nifty was up by 83.95 points or 0.33% to 25,235.90.