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Indian markets fell sharply on Friday amid uncertainty over how big will future U.S. rate hikes be. Today, markets are likely to make negative start amid weak global cues. There will be volatility in the entire week amid the impending F&O expiry. Traders will be concerned as the Reserve Bank of India (RBI) data showed that the country’s foreign exchange reserves fell $2.238 billion to $570.74 billion in the week ended August 12. In the previous week ended August 5, the foreign exchange reserves declined $897 million to $572.978 billion. Some cautiousness will also come as retail inflation for farm and rural workers increased to 6.60 per cent and 6.82 per cent, respectively, in July mainly due to higher prices of certain food items. In June retail inflation for farm and rural workers stood at 6.43 per cent and 6.76 per cent respectively. Separately, the minutes of the MPC's recent policy meeting expressed concern that the impact of recent changes to GST rates and somewhat uneven distribution of the southwest monsoon rainfall could be a source of upward pressure on prices. Also, the area under paddy in the week ended August 18 was almost 8.25 per cent less than in the equivalent period last year. However, some respite may come later in the day as the finance ministry's monthly economic review said India is better placed on the growth-inflation-external balance triangle for 2022-23 than it was two months ago, on the back of government policy response and the Reserve Bank's monetary policy actions. Some support may also came as after turning net buyers last month, foreign investors have shown tremendous enthusiasm for Indian equities and have infused close to Rs 44,500 crore in August so far amid softening of inflation in US and falling dollar index. There will be some buzz in jewelry industry stocks as the government data showed that India's gold imports rose 6.4 per cent to $12.9 billion during April-July this fiscal due to healthy demand. There will be some reaction in real estate industry stocks with a private report that India's residential market is expected to sustain demand momentum despite rise in mortgage and property rates as sales this year across the top 7 cities are likely to breach pre-pandemic level of 2.62 lakh units.

The US markets ended lower on Friday with traders anxious about inflation and what the Federal Reserve will do to combat it. Asian markets are trading mostly in red on Monday amid concerns most major central banks are committed to raising interest rates no matter the risks to growth.

Back home, Indian equity benchmarks ended over a percent lower on Friday, dragged by heavy selling pressure in Realty and Metal stocks on profit-taking and weak global market trends.  After making slightly positive start, key gauges traded on flat note as traders got anxious with an analysis of industrial output and merchandise exports by India Ratings and Research suggested that the Indian manufacturing sector, which received a fillip in FY22 due to export growth, is likely to be hit by a slump in foreign trade activity in FY23. Markets fell sharply in late morning session as an RBI article has warned that big bang privatisation of public sector banks can do more harm than good, and asked the government to take a nuanced approach on the issue. Sentiments remained down-beat in late afternoon deals, as Reserve Bank of India turned net seller of the US currency in June after it sold $3.719 billion on a net basis. In the reporting month, the central bank purchased $18.96 billion from the spot market and sold $22.679 billion. Some concerns also came with the finance ministry stating that exemptions specified in Free Trade Agreement (FTA) with regard to country of origin will prevail in case of conflict between revenue department and importer. Traders overlooked the PHD Chamber of Commerce and Industry’s (PHDCCI) report stated that increasing domestic production in sectors such as chemicals, automotive components, drug formulations and consumer electronics will help in reducing imports worth about $35 billion from China in the coming times. Finally, the BSE Sensex fell 651.85 points or 1.08% to 59,646.15 and the CNX Nifty was down by 198.05 points or 1.10% to 17,758.45.

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