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Markets to make a somber start on weak GDP data

The Indian markets after a volatile day of trade ended marginally in red in the last session with traders turning cautious ahead of the GDP data. Today, the start is likely to be somber and traders will be reacting negatively to some weak economic data. India lost the tag of the world’s fastest growing major economy to China with a gross domestic product growth of 6.1 per cent in the three months through March from a year earlier, also slowing from a provisional 7 percent in the previous quarter. Growth for the year ending in March came in at 7.1 percent, in line with the official estimate. Meanwhile, India Inc. has said that the government's note ban move clearly had a debilitating impact on India's economy. Also, the growth of eight core sectors declined to 2.5 per cent in April, dragged down by lower coal, crude oil and cement production. Core sector growth was 8.7 per cent in April last year. However, there will be some solace with the government achieving the fiscal deficit target of 3.5 percent of GDP in 2016-17. As per Controller General of Accounts (CGA) data fiscal deficit was 3.51 percent of GDP or Rs 5.35 lakh crore in 2016-17. The CGA further said that revenue deficit during the last fiscal was 2.02 percent of GDP. There will be some buzz in the PSU oil marketing companies, as petrol and diesel prices were hiked on Wednesday, while Petrol price was increased by Rs. 1.23 the diesel price was hiked by Rs. 0.89. The auto companies will be in focus as they will start announcing their monthly sales numbers.

Indian benchmarks end a dull session with modest cut; broader markets outclass blue-chips

It turned out to be a lackadaisical performance from Indian benchmark indices on Wednesday, as they failed to snap the session in the green territory and settled marginally below the neutral lines. The frontline gauges took a breather, after closing at record highs for the previous sessions, as investors waited for gross domestic product (GDP) data due later in the day and searched for fresh corporate triggers with the results season coming to an end. According to India’s former chief statistician PronabSen, the country’s GDP for 2016-17 will get 50 basis points (bps) push to 7.6 percent from the government’s estimate of 7.1 percent, due to the recent revision of the base year of the Wholesale Price Index (WPI) and the Index of Industrial Production (IIP).

Further, investors around the world also turned cautious after a powerful bomb exploded in the morning rush hour in the centre of Kabul on Wednesday, killing at least 80 people, wounding hundreds and sending clouds of black smoke into the sky above the presidential palace and foreign embassies. However, losses remained capped with the Moody's Investors Service’s report stating that Indian economy will grow by 7.5 per cent in the current fiscal year, 7.7 per cent in 2018-19 and will reach to around 8 per cent in 3-4 years on the back of government's various reforms. Some support also came with report that Southwest monsoon arriving in Kerala on the expected date this year and also advancing into some parts of the Northeast India. Also, Prime Minister NarendraModi while speaking at the Indo-German Business Summit in Berlin said that India has one of the most liberal FDI policy regimes in the world and more than 90 percent of foreign investment flows are under automatic route. Meanwhile, Aviation stocks gained traction on expectations that a slide in oil prices would reduce carriers' fuel cost, which typically constitute about 50% of airlines' operating costs.

Asian markets end mixed on Wednesday

Asian equity markets made a mixed closing on Wednesday as a stronger yen and a fall in oil prices ahead of weekly US industry inventory estimates later in the day offset better-than-expected manufacturing data from China. Japanese shares ended lower as the dollar hit two-week lows against the yen after mixed US data released overnight and new poll results showing that UK Conservatives could fall short of overall majority in next month's national election. Meanwhile, Chinese shares ended higher after data showed activity in China's manufacturing sector grew faster than expected in May. China's manufacturing sector continued to expand in May and at a steady pace, with a manufacturing PMI score of 51.2. That's unchanged from the April reading and surpassed expectations for 51.0. The non-manufacturing PMI came in with a score of 54.5 up from 54.0 in the previous month.

US markets closed lower for second straight day

The US markets closed lower on Wednesday, but off their worst levels of the session, notching gains for the month as a slump in bank shares and a mixed reading of economic reports weighed on investor sentiment. Coupled with the drop in oil prices and reports that former FBI Director James Comey will publicly testify that President Donald Trump pushed him to end the probe into former national-security adviser Michael Flynn also weighed on the sentiments. On the economy front, a reading for pending-home sales came in below expectations. Pending-home sales from the National Association of Realtors fell 1.3% to a level of 109.8 from a reduction in the March reading, whereas a gauge of economic health, the Chicago business barometer, or Chicago PMI, rose to 59.4 in May, its highest level in two and half years. Earlier, reporting agency MNI Indicators had mistakenly said the gauge fell to 55.2.

The Dow Jones Industrial Average lost 20.82 points or 0.10 percent to 21,008.65, Nasdaq was down 4.67 points or 0.08 percent to 6,198.52, while S&P 500 edged lower by 1.11 points or 0.05 percent to 2,411.80.

Indian economy to grow 7.5% in current fiscal and 7.7% in 2018-19:

Just ahead of the release of the fourth quarter GDP numbers, the global credit rating agency, Moody's Investors Service in its latest report ‘Global Macro Outlook’ has said that Indian economy will grow by 7.5 per cent in the current fiscal year, 7.7 per cent

in 2018-19 and will reach to around 8 per cent in 3-4 years on the back of government's various reforms.

The agency said that the economy will strengthen as the impact of last year's demonetization fades and with the government successfully pushing through several key reforms such as liberalisation of FDI rules in a number of key sectors, July rollout of the

Goods & Service Tax (GST) and a national bankruptcy code, noting that these reforms will help reduce inefficiencies and improve trend growth over the long run.

However, the report has pointed that the private sector investment has remained weak despite progress on reforms. On the problem of mounting bad loans, Moody's noted that persistent banking sector weakness from a high proportion of delinquent loans on bank

balance sheets will weigh on growth, if not resolved, by constraining credit forinvestment related activity. Besides, it said that the inflation rate will rise to around 5 per cent by the end of this year and expects the Reserve Bank of India to hold the policy repo rate steady, holding a neutral stance in this growth environment.

Banks' stressed assets may increase to 15% of total loans by March 2018: S&P Ratings

Signaling that bad loans will continue to hurt Indian banks, credit rating agency, S&P Global ratings in its latest report has said that the credit profiles of banks are unlikely to improve over the next 12 months seeing that their total stressed assets are like

ly to increase to 15 percent of total loans by the end of March 2018. The agency further noted thatthe public sector banks will account for most of this weakness.

In its latest report titled 'No Quick Cure for India's Banking Blues', the rating agency has said that performance of public sector banks (PSUs) that it rated was dismal in theMarch quarter of the last fiscal, adding that year-over-year increase in non-performing loans (NPLs) led to higher provisions and lower profits. Besides, it said that the available pool of capital to absorb unexpected losses remained thin and loan growth was among the lowest in a decade.

S&P Ratings stated that PSU banks operate with a thin capital cushion and they will have to continue to rely on external capital infusion to meet the Basel III capital requirements, or sell off their non-core assets or investments. Besides, large haircuts on loans may require resolving stressed loans. The report further said that capital shortfall and asset quality problems could pave the way for consolidation among the government-

owned banks and this consolidation needs to be accompaniedby significant improvement in risk management practices, efficiency gains, capitalisation and improvement in overall governance.