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Indian markets staged a smart recovery in the second half of the session and ended flat with positive bias on Monday after wholesale price inflation remained in the negative territory for the fourth month in a row in July. Today, markets are likely to get negative start after a day’s holiday amid weak cues from the overseas counterpart. Higher-than-expected India’s Consumer Price Index (CPI) inflation print as well as trade deficit figures to keep markets under pressure. Retail inflation spiked to a 15-month high of 7.44 per cent in July much higher than 4.87 per cent in June as tomatoes, vegetables and other food items turned costlier, overshooting Reserve Bank’s comfort level for the first time in the current fiscal. Also, traders will be concerned as the value of goods exported from India fell to a nine-month low at $32.25 billion in July, witnessing a 15.9 per cent contraction as external demand continued to remain sluggish due to factors including a slowdown and high inflation in developed economies. India's trade deficit, which shows the difference between imports and exports, rose to $20.67 billion in July as compared to $20.13 billion in June. However, some support may come as a report by SBI Research showed that the per capita income of Indians as gleaned from income-tax filing is expected to increase from Rs 2 lakh in FY23 to Rs 14.9 lakh in FY47, coinciding with 100 years of the country’s Independence. There will be some buzz in cotton industry stocks as the Cotton Association of India (CAI) maintained the cotton crop production forecast for the 2022-23 season at 311.18 lakh bales. In the last cotton season, the total cotton production was at 307.05 lakh bales. Oil & gas industry stocks will be in focus as the government hiked special additional excise duty on crude petroleum to Rs 7,100 per tonne with effect from August 15. There will be some reaction in diamond industry stocks with report that the Indian diamond industry is set to focus on domestic markets and emerging markets in ASEAN countries in an attempt to neutralise the impact of reduced demand from the US and the European Union (EU). Aviation industry stocks will be in limelight as DGCA data showed that India's domestic air passenger traffic volume surged 25 per cent year-on-year to 1.21 crore passengers in July.

The US markets ended lower on Tuesday after a stronger-than-expected report on U.S. retail sales data. Asian markets are trading in red on Wednesday as renewed concerns about U.S. interest rates slugged Wall Street, while investors still smarted from dismal Chinese economic data and the absence of meaningful stimulus.

Back home, Indian equity benchmarks managed to close marginally higher in the highly volatile session on Monday as investors preferred to remain on back foot ahead of the Retail inflation data later in the day. The markets made a gap-down opening and stayed in the negative terrain in the first half as data showed that growth in the index of industrial production (IIP) cooled to a three-month low of 3.7 per cent in June from 5.2 per cent in May, on the back of a high base effect and slowdown in manufacturing output. Some concern also came as the National Institute of Public Finance and Policy (NIPFP) in a mid-year macroeconomic review said that India’s economic growth is expected to slow down to 6 per cent in this financial year (FY24) from 7.2 per cent in FY23 due to headwinds in the global economy. Also, latest data by the Reserve Bank of India showed India’s foreign exchange reserve declined by $2.4 billion to $601 billion in the week ended July 4. However, key gauges cut their losses in the second half and closed with minor gains as data showed that net direct tax collections swelled 17.33 per cent to Rs 5.84 lakh crore so far this fiscal, reaching 32 per cent of the full-year budget estimates (BE). The Income Tax department said the collections from direct taxes, which include personal income tax and corporate tax, up to August 10, 2023, continue to register ‘steady growth’. Traders paid no heed towards data indicating that India’s inflation based on wholesale price index (WPI) deflated for the fourth straight month in July at (-) 1.36% as against (-) 4.12% recorded in June, 2023, due to fall in the prices of Minerals, Mineral oils, and Electricity. Finally, the BSE Sensex rose 79.27 points or 0.12% to 65,401.92 and the CNX Nifty was up by 6.25 points or 0.03% to 19,434.55.

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