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Indian markets ended lower on Friday after hawkish remarks on interest rates from the U.S. and Federal Reserve and other major central banks. Today, start of new week is likely to be cautious amid mixed cues from global markets. Also, the ongoing diplomatic tension between India and Canada likely to weight on markets. Continued foreign fund outflows likely to dent domestic sentiments. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FII) sold shares worth Rs 1,326.74 crore on September 22. Traders will be concerned as the Reserve Bank said India’s foreign exchange reserves declined $867 million to $593.037 billion in the week ended September 15. In the previous reporting week, the overall reserves dropped $4.99 billion to $593.90 billion. Some cautiousness will come as the finance ministry kept its estimate for the country’s real gross domestic product (GDP) growth in 2023-24 (FY24) unchanged at 6.5 per cent. However, it has cautioned that the monsoon deficit in August could affect both kharif and rabi crops and said rising crude oil prices needed to be watched. Traders may take note of a private report that the Reserve Bank is likely to maintain status quo on policy rates for the fourth time in a row at its bi-monthly monetary policy review meeting early next month, as retail inflation continues to remain high and the US Federal Reserve has decided to keep a hawkish stance for some more time. However, some support may come as Chief Economic Advisor V Anantha Nageswaran said the inclusion of Indian government bonds in JP Morgan's emerging market debt index is expected to broaden India's investor base, potentially appreciate the rupee, and make it easier for Indian financial institutions to lend money. He added the move is also likely to simplify financing of the current account deficit (CAD) while reducing government borrowing costs. There will be some reaction in shipping and port industry stocks as shipping minister Sarbananda Sonowal said India expects to sign investment pacts worth Rs 10 lakh during the Global Maritime India Summit in New Delhi scheduled for October 17-19. Also, there will be some movement in semiconductor related stocks as electronics and IT minister Ashwini Vaishnaw said the central government will focus on niche opportunities in the semiconductor space, including compound semiconductors, where it can quickly emerge as a global leader. Meanwhile, there will be some buzz in primary market as two mainboard initial public offers (IPOs) will open for subscription. JSW Infrastructure is planning to raise Rs 2,800 crore, while Updater Services aims to mop up Rs 640 crore.

The US markets ended lower on Friday as concerns about the outlook for interest rates continued to weigh on the markets. Asian markets are trading mixed on Monday as investors look toward inflation data from across the region this week.

Back home, Indian equity benchmarks ended the volatile day of trade with a cut of one third of a percent following a sell-off overnight in the US markets on fears of that interest rates will stay higher for longer. Markets made a cautious start as escalating diplomatic tensions between India and Canada impacted sentiments. India temporarily suspended visa operations with Canada for an indefinite period due to alleged ‘security threats’ against diplomatic staff, amidst a diplomatic crisis that arose following the latter’s allegation that India is responsible for the killing of a Sikh activist. Persistent selling by FIIs dampened sentiments in domestic markets. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FII) sold shares worth Rs 3,007.36 crore on September 21. However, markets traded in green for brief period in noon deals as some support came with reports that India’s inclusion in the JPMorgan Government Bond Index is positive, though short-term equity challenges may persist due to Foreign Portfolio Investors’ selling as the US dollar strengthens. Sentiments also got boost as Reserve Bank Deputy Governor Michael D Patra said that India will be a $5 trillion economy and the third largest in the world by market exchange rates by 2027, aided by the demographic advantage and pace of financial sector development. Meanwhile, RBI said that it has proposed tighter norms for treatment of wilful defaulters under which banks and other lenders will be required to examine all accounts with outstanding amount of Rs 25 lakh and more to see if the borrower is deliberately not repaying the loan. The central bank has issued a 'Draft Master Direction on Treatment of Wilful Defaulters and Large Defaulters' on which comments have been invited till October 31. However, key gauges failed to hold gains and selling in last leg of trade dragged benchmarks lower for the day. Finally, the BSE Sensex fell 221.09 points or 0.33% to 66,009.15 and the CNX Nifty down by 68.10 points or 0.34% to 19,674.25.

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