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Indian benchmarks closed with losses in a choppy trade on Thursday as unabated foreign fund outflows hit the investor sentiment. Today, the start of last trading session of the week is likely to be positive aided by cooler-than-expected retail inflation data, for the month of December, in India and the US. India’s retail inflation or CPI fell to a one-year low of 5.72% in December, owing to a sharp deflation (-15.08%) in vegetables and easing price pressures in the broader food and beverages category. US CPI inflation in December eased. The year-on-year inflation number for December has fallen to 6.5% from 7.1% in November 2022. Sentiments will also get a boost as India’s factory output rebounded to a five-month high in November. Traders may take note of report that Prime Minister Narendra Modi will hold a pre-budget meeting with more than two dozen economists and sector experts at NITI Aayog to seek their view on measures to push up economic growth. However, there may be some cautiousness as foreign institutional investors (FII) have net sold shares worth Rs 1,662.63 crore on January 12, as per provisional data available on the NSE. Traders may be concerned as a private report stated that the Centre as well as state governments are likely to budget for higher market borrowings next fiscal even though the Union Budget may peg a lower-than-expected fiscal deficit at 5.8 per cent of GDP. There will be some reaction in coal industry stocks as days after the Union power ministry directed all power generating companies (gencos) to import coal up to 6 per cent of their requirement, the coal ministry said the decision was just an act of caution and that domestic coal capacity would be ramped up. Banking stocks will be in limelight as in a research report, S&P Global said Indian banks posted some of the best total stock returns among their Asia-Pacific peers for the second consecutive quarter as they continued to benefit from solid financial metrics, a resurgent equities market, and growth prospects for the country's economy. Investors will also be eyeing the earnings reaction with lots of companies slated to report their December quarter results, including L&T Housing Finance, Just Dial, and Wipro.

The US markets ended lower on Thursday after a reading of consumer prices fed expectations the Federal Reserve may have the leeway to scale back the size of future interest rate hikes. Asian markets are trading mostly in green on Friday after the US consumer price index showed inflation cooled in December, raising investors’ hopes that the Federal Reserve can return to slower interest rate hikes.

Back home, Indian equity benchmarks traded volatile and ended lower on the weekly expiry day. After the flat start, the trade was negative for the most part of the session as investors preferred a cautious approach ahead of inflation and industrial production data to be released later in the day.  Traders also remained cautious as a World Economic Forum’s report stated that a cost of living crisis, digital inequality, geopolitical contest for resources, natural disasters and extreme weather events are the biggest risks for India over the short and medium term. Some anxiety also came with a private report stating that funding for Indian startups dropped by 33 per cent to $24 billion in 2022 as compared to the previous year though it was nearly double the amount recorded in 2019 or 2020. Unabated foreign fund outflows also hit the investor sentiment. Foreign institutional investors (FIIs) offloaded shares worth Rs 3,208.15 crore on Wednesday, according to exchange data. However, indices trimmed most of their losses in the final hours. Traders found some support with the government’s data showing that the country's gross direct tax collection rose 24.58 per cent to Rs 14.71 lakh crore till January 10 this fiscal, buoyed by an upsurge in personal income tax mop-up. After adjusting refunds, net direct tax collection stood at Rs 12.31 lakh crore, 19.55 per cent higher than the net collections for the corresponding period of last year. Traders also took a note of Road Transport and Highways Minister Nitin Gadkari’s statement that India and Japan will undertake joint projects for digital transformation in the areas of Intelligent Transport Systems (ITS) and eco-friendly mobility. Further, he said India has always placed the Indo-Pacific at the heart of its engagement with the countries of Southeast and East Asia under India's Act East Policy. Finally, the BSE Sensex fell 147.47 points or 0.25% to 59,958.03 and the CNX Nifty was down by 37.50 points or 0.21% to 17,858.20.

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