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Benchmarks likely to make cautious start amid mixed macro-economic data

Indian markets snapped three-day winning streak and settled in red territory on Wednesday dragged by losses in banking and auto stocks amid US-China trade tensions. Today, the start is likely to be cautious amid mixed macro-economic data coupled with weakness in global markets. As per the government data, retail inflation spiked to a seven-month high of 3.05 percent in May, though remaining within RBI's comfort level, as kitchen items like vegetables, meat and fish turned dearer. On the other hand, India's industrial output grew to a six-month high of 3.4 percent in April mainly on account of improvement in mining and power generation. There will be some cautiousness with a private report that deal making through the private equity/venture capital routes saw a sharp 54 percent dip in May at a low $2.8 billion due to fewer large deals. The dip comes amid data release of sagging GDP growth fuelled largely by a fall in consumption which has been the one of the favourite for investors as well. However, some support may come later in the day with a UN report showing that Foreign Direct Investment (FDI) to India grew by 6 per cent to $42 billion in 2018, with strong inflows in the manufacturing, communication and financial services sectors, and cross-border merger and acquisition activities. Meanwhile, the Cabinet approved introduction of the Special Economic Zones (Amendment) Bill, 2019 in the ensuing session of Parliament. The bill will replace Special Economic Zones (Amendment) Ordinance, 2019, which was promulgated in March. The ordinance had paved the way for trusts to set up units in special economic zones (SEZs). There will be some buzz in the telecom stocks with report that the Telecom regulator TRAI extended the timeline for implementation of revised Mobile Number Portability (MNP) norms, by more than three months to September 30, providing relief to operators. There will be some reaction in sugar stocks with a private report indicating that sugar output in India may drop to a three-year low next season from a record as dry weather shrivels cane plants in some major growing areas of the country.

The US markets ended in red on Wednesday amid lingering trade tensions and questions over the direction of Federal Reserve policy. Asian markets are trading mostly lower on Thursday, weighted down by concerns of a flattening global growth.

Back home, snapping three days winning streak, Indian equity benchmarks ended the Wednesday’s trade with a cut of around half a percent, as traders remained on sidelines ahead of macro-economic data. Retail inflation and industrial production data for May and April, respectively, due to be released later in the day. There is expectation that retail inflation likely accelerated to a seven-month high in May on rising food prices. Traders also remained anxious with former Chief Economic Advisor Arvind Subramanian’s statement that country’s growth has been overestimated by nearly 2.5 per cent under both UPA and NDA rule. The actual growth is likely to be lower, at nearly 4.5 per cent, down from 7 per cent between 2011-12 and 2016-17. Market participants paid no heed to the Reserve Bank of India’s (RBI) statement that it will infuse Rs 15,000 crore into the financial system through bond purchases on June 13. Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the RBI has decided to conduct purchase of (six) Government securities under OMOs through multi-security auction using the multiple price method. Meanwhile, State Bank of India (SBI) in its research report ‘Ecowrap’ has underlined RBI’s new guidelines to deal with bad loans will provide lenders the headroom and flexibility for resolution of large ticket stressed asset cases under the Insolvency and Bankruptcy Code (IBC). Finally, the BSE Sensex declined 193.65 points or 0.48% to 39,756.81, while the CNX Nifty was down by 59.40 points or 0.50% to 11,906.20.

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