Domestic markets are likely to sustain the positive momentum, thanks to sustained buying by foreign portfolio investors. With the wholesale price index slipping into negative zone, analysts expect Reserve Bank of India to cut interest rates sooner than later, while maintaining the status-quo stance in the near-term.

SGX Nifty at 18,458 indicates flat-to-positive opening on Tuesday against the Nifty Futures Monday’s closing price of 18,411. Global stocks, too, are sending positive signals for the domestic markets.

Trade data

However, analysts remain cautious as trade numbers are not encouraging. India’s merchandise exports continued to exhibit weakness contracting for the third straight month. Weakness in labour-intensive items such as textiles, garments, leather products, gems and jewellery are of major concern.

“Given the weak global growth outlook, we expect overall merchandise exports to contract by 5 per cent in FY24,” said Rajani Sinha, Chief Economist of CARE Edge. 

Imports fell sharply by 14 per cent (y-o-y) in April partly due to lower prices of global commodities.

“However, what is worrisome is the data on imports of non-oil and non-gold imports, indicating that the domestic demand has contracted on a y-o-y basis for the fourth consecutive month. The easing in India’s merchandise trade deficit to a 20-month low of $15.2 billion in April comes as a relief. Trade deficit is expected to narrow further and we expect CAD to reduce to 1.6 per cent of GDP in FY24 from estimated 2.1 per cent in FY23,” she added.

FPIs’ positive outlook

Meanwhile, FPIs continue to pour money, belying predictions of global experts who said that Indian market may not see higher inflows due to stiff valuation.

“FIIs have been consistent buyers (about ₹13,278 crore) so far this month,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

“The expectation of RBI to end the rate hike cycle after India’s CPI inflation eased to an 18-month low of 4.7 per cent in April and remained under RBI’s comfort zone, cheered markets,” he said.

WPI inflation falling to -0.92 per cent in April contributed to positive momentum in the market, despite mixed global cues, he added.

“Overall, we maintain a positive outlook with a “Buy on dips” strategy,” he further said.

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