Benchmark indices likely to get negative start tracking weakness in global markets

Indian markets ended lower on Tuesday after data showed India's CPI inflation rose to a nine-month high of 5.49% in September versus forecast of 5% and 3.65% in August on the back of rising food prices. Today, benchmark indices are likely to get negative start tracking weakness in global markets. Traders will be concerned as Reserve Bank of India (RBI) data showed that India’s outward foreign direct investment (FDI) commitments declined by about $900 million to $3.72 billion in September 2024, compared to $4.63 billion in September 2023. There will be some cautiousness after SBI research stated that the soaring figures of retail inflation in September could force the Reserve Bank of India (RBI) to continue with neutral stance for a longer duration, and added that first rate cut could be based on growth, and need not be inflation. The research stated on the rationale that if inflation remains sketchy in the coming months, the apex bank will consider growth as the criteria for rate cut. However, fall in crude oil prices likely to cap downside. Oil prices slid to a near two-week low, extending Monday's losses amid easing supply pressures arising from the conflict in the Middle East, amid reports Israel's Prime Minister Benjamin Netanyahu told US President Joe Biden's administration that Israel would avoid striking Iranian oil targets. Additionally, OPEC and the International Energy Agency both lowered their global demand forecasts, mostly due to weakness in China. Traders may take note of RBI deputy governor Michael Debabrata Patra’s statement that the retail inflation is projected to average 4.5 per cent in 2024-25 and align with the target on a durable basis by 2025-26. The government has tasked the Reserve Bank of India to ensure that consumer price index (CPI) based retail inflation at 4 per cent with a tolerance band of +/- 2 per cent around it. Meanwhile, the group of ministers (GoM) tasked with simplifying the goods and services tax (GST) structure will meet on October 20 to deliberate on rate rationalisation proposals related to food, footwear and textile items. The items under review are in the 12 percent tax bracket. There will be some buzz in aviation stocks as the Directorate General of Civil Aviation (DGCA) said domestic carriers flew 1.30 crore passengers in September, which is 6.38 per cent higher compared to the year-ago period. In September last year, airlines carried 1.22 crore passengers. Telecom stocks will be in limelight as communications minister Jyotiraditya Scindia said India is resolved to lead the world in 6G, and termed the telecom sector of the country as aggressive and ambitious. He added said with the Bharat 6G Alliance, India hopes to contribute at least 10 per cent patents to 6G standardisation. There will be some reaction in air-conditioner industry stocks as a study conducted by ICRA noted that the Indian room air-conditioner (RAC) industry is poised for unprecedented growth, with year-on-year sales volumes expected to grow by 20-25 per cent to reach record highs of 12-12.5 million units in the financial year 2024-25. It added the sales are expected to grow by 10-12 per cent in the 2025-26 fiscal. Investors will continue to keep close eye in earning of the companies.

The US markets ended lower on Tuesday as a weak sales forecast from European chip fabrication equipment maker ASML weighed on tech shares. Asian markets are trading mostly in red on Wednesday tracking overnight losses on Wall Street.

Back home, Indian equity benchmarks went through sluggish trade during the day with Nifty and Sensex settling below the psychological 25,100 and 81,850 levels respectively. Volatility occurred during the day amid a private report stating that the hotter-than-expected CPI print for September will push RBI to defer its rate cut plans. After making positive start, soon indices witnessed sell off to turn into red as sentiments turned pessimistic with the government data showed that soaring vegetable prices pushed the retail inflation rate to a nine-month high of 5.49 per cent in September 2024. The consumer price index (CPI)-based retail inflation rate was 3.65 per cent in August and 5.02 per in September 2023. Traders overlooked report that John Chambers Chairman, US-India Strategic Partnership Forum said that Indian administration has set the stage for growth, not for the next five years but for the next twenty-five years. He added being the fastest-growing economy in the world by the end of the century India will become much bigger than China in terms of GDP.  Market participants paid no heed to US-India Strategic Partnership Forum President and CEO Mukesh Aghi’s statement that exports are going to be a major job creator for India as the country moves towards becoming a $5 trillion economy. Aghi also stressed that India and the US should continue to strengthen their economic engagements and increase the bilateral trade to $500 billion going forward. Sector wise, airline industry stocks remained in focus as credit rating agency ICRA in its latest report has said that the overall cargo volumes are expected to see a healthy year-on-year growth of 9-11 per cent to 3.6-3.7 million tonnes this fiscal year (FY25) on the back of estimated higher domestic and international cargo volumes while the outlook on airport infrastructure is stable. Finally, the BSE Sensex declined 152.93 points or 0.19% to 81820.12, and the CNX Nifty was down by 70.60 points or 0.28% to 25057.35.