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Indian equity markets ended sharply higher on Tuesday powered by gains in heavyweight financial services and banking stocks. Today, markets are likely to make positive start on firm cues from US markets overnight and falling crude oil prices. Traders will be getting support as RBI in its latest data has said that India’s current account deficit (CAD) narrowed to USD 1.3 billion or 0.2 per cent of GDP in the January-March quarter of FY23, mainly due to moderation in the trade deficit and a robust increase in services exports. It stated India’s CAD decreased to USD 1.3 billion (0.2 per cent of GDP) in Q4:2022-23 from USD 16.8 billion (2.0 per cent of GDP) in Q3:2022-231, and USD 13.4 billion (1.6 per cent of GDP) a year ago. Sentiments may get boost as UK Minister for Investment Lord Dominic Johnson said an India-UK free trade agreement (FTA) is really important for both nations and it is for businesses on both sides to help drive that agenda. Johnson said he is very optimistic about an FTA even as he declined to put a timeframe to it. However, there may be some cautiousness in the markets later in the day as Reserve Bank of India’s data showed net profit of the manufacturing, and the IT sector moderated in 2022-23. The net profit margin of the manufacturing sector declined to 8.7 per cent in 2022-23, against 10.6 per cent in 2021-22. There may be some buzz in road industry related stocks as Union Minister Nitin Gadkari said India’s road network grew 59 per cent to become the second largest in the world as part of the development work carried out by the government in the last nine years. India’s road network stood at 1,45,240 km today compared to 91,287 km in 2013-14. There will be some action in liquor industry related stocks as sales of Indian-made foreign liquor (IMFL) rose by 14 per cent in volume terms to 385 million cases in FY 2022-23 while premium products priced over Rs 1,000 per 750ml bottle grew by 48 per cent, according to industry body CIABC. Sales are almost 12 per cent higher than the pre-Covid levels of FY 2019-20, indicating that the impact of Covid has fully worn off.

Asian markets are trading mixed in early deals on Wednesday following firm cues from US markets overnight. Traders were cautious as China’s industrial firms recorded a 18.8% tumble in cumulative profits in the first five months of 2023 from the year before. The US markets ended higher on Tuesday as upbeat economic data soothed investor worries about an imminent recession triggered by the Federal Reserve’s aggressive interest rate hikes. 

Back home, Indian equity benchmarks ended higher by over half a percent on Tuesday, powered by gains in Realty, Banking and Metal stocks. Markets made a positive start and stayed in green for whole day, as traders took encouragement after the Department of Expenditure, Ministry of Finance, Government of India, has approved capital investment proposals of Rs. 56,415 crore in 16 States in the current financial year. Capital investment projects in diverse sectors have been approved, including health, education, irrigation, water supply, power, roads, bridges, and railways. Some support also came in with a private report stating that India's current account balance likely turned positive in January-March, marking the first quarterly surplus in nearly two years thanks to a narrower trade deficit and an increase in services exports. Markets picked up momentum in the second half and got stronger towards the end of the trading session, as sentiments got boost after S&P Global Ratings raised its assessment of India's banking sector, citing a strong recovery underway in the Indian financial sector. The rating agency said that India's 'Banking Industry Country Risk Assessment', an indicator of an economy's financial sector, has been raised one notch to 5 from 6 earlier. Adding to the optimism, in an effort towards enhancing ethanol production capacities further with the vision to boost the agricultural economy and to reduce dependence on imported fossil fuel, the central government has extended timeline for disbursement of loan/completion of ethanol projects up to September 30, 2023. Finally, the BSE Sensex rose 446.03 points or 0.71% to 63,416.03 and the CNX Nifty was up by 126.20 points or 0.68% to 18,817.40.     

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