Domestic indices likely to make cautious start ahead of U.S. presidential election results

Indian equity markets reversed earlier losses to close higher on Tuesday on account of hectic buying in Metal, Bankex and PSU companies’ stocks. Today, markets are likely to make cautious start ahead of the U.S. presidential election results. Foreign fund outflows likely to dent sentiments in the markets.  As per NSE data, Foreign Institutional Investors (FII) were net sellers of Indian equities worth Rs 2,569.41 crore on November 05. Traders may be cautious as tax officers have detected about 18,000 fake companies registered under GST which have been involved in tax evasion of about Rs 25,000 crore. In the recently concluded all-India drive against fake companies, GST officers had identified 73,000 companies which they suspected of being set up only to avail of input tax credit (ITC) without any actual sale of goods and thereby defraud the exchequer.  Further, a private report said the growth rate in festive consumption halved to 15 per cent in the current year. It attributed its findings to rough estimates and added that the same growth had stood at 32 per cent in 2023 and 88 per cent in 2022. It said while festive demand remained steady in rural areas and tier-2 and tier-3 cities, metros and industrial demand was weak, leading to mixed overall festive consumption trends. However, there may be some encouragement in markets as total production of main kharif crops-rice, pulses and maize-in the 2024-25 crop season is expected to surpass last year mainly because of good monsoons and gains from a larger area under cultivation, according to the first advance estimate issued by the agriculture ministry. While kharif rice output is expected to increase nearly 6% to 119.93 million tonnes from 113.25 million tonnes last year, tur production is expected to rise about 3% to 3.5 million tonnes from 3.4 million tonnes. Meanwhile, the Ministry of Statistics and Programme Implementation (MOSPI) has decided to revise the release time for the Consumer Price Index (CPI) and IIP from 5.30 PM to 4.00 PM on 12th of every month (the next working day if the 12th falls on a holiday of CPI) and Previous working day if 12th falls on a holiday in case of IIP).

The US markets ended higher on Tuesday after data signaled a solid economy, but investors braced for volatile trading this week as voting was underway in an extremely tight US presidential election. Asian markets are trading mostly in green in early deals on Wednesday following positive cues from the US markets overnight.  The Bank of Japan’s monetary policy meeting minutes will be released later in the day, which could give insights on where the members stand on the bank’s policy path. 

Back home, Indian equity benchmarks staged recovery to close sharply higher on Tuesday on late buying in Metal, Banking and Basic Materials shares amid firm trends in global equities. Markets opened on a weak note and traded in a range with a negative bias in the first half amid constant foreign fund outflows. Foreign Institutional Investors (FIIs) offloaded equities worth Rs 4,329.79 crore on Monday, according to exchange data. Besides, rising crude oil prices weighed on the domestic sentiments. Oil prices climbed as the Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, decided to push back its December production increase by at least a month. Traders remained cautious due to persisting Middle East tensions, and ahead of the US presidential elections. Traders took a note of report that corporate affairs ministry underscored the need for a ‘continuous refinement’ in the Insolvency and Bankruptcy Code (IBC) to address future challenges in corporate recast effectively. However, value buying in the afternoon session helped indices recover losses and closed in the green. Traders took note of private report that Finance Minister Nirmala Sitharaman chaired a meeting on November 4 to conduct a comprehensive review of the Income Tax Act 1961, in line with the announcement made during the last Union Budget. Separately, the Securities and Exchange Board of India (Sebi) has allowed mutual funds (MFs) to invest in overseas funds and unit trusts (UTs) that have up to 25 per cent exposure to Indian equities. The decision opens scope for domestic funds to invest in prominent global schemes, especially passive ones, which provide exposure to markets across the globe. Finally, the BSE Sensex rose 694.39 points or 0.88% to 79,476.63, and the CNX Nifty was up by 217.95 points or 0.91% to 24,213.30.