Flat opening seen for Nifty, Sensex as Russia-Ukraine war escalates

Gift Nifty at 24,882 indicates a flattish opening.
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SARINYAPINNGAM

Domestic markets are likely to open on a positive note on Monday amid positive economic data. However, rising geopolitical tensions between Russia and Ukraine and valuation concerns will keep the market under pressure, said analysts. Gift Nifty at 24,882 indicates a flattish opening. GST collections and GDP growth came in better than expected.

According to Karthik Mani, Partner, Indirect Tax, BDO India, ”The year-on-year increase of 20.4 per cent in total net GST collections for May 2025 is largely driven by growth in net GST collections on imports, which have grown by 72.9 per cent, with net domestic collections showing a comparatively muted growth of 9.7 per cent. This trend of muted domestic collections has been reflected in GST collections’ growth from some of the major states including UP, Gujarat, Haryana etc, showing lower-than-average growth, with Maharashtra and Karnataka collections being closer to overall average growth rates. However, Tamil Nadu and Delhi have bucked the trend and have shown higher-than-average growth. 

The month-on-month GST collections have shown a reduction, as expected, since the GST collections of April traditionally, have been higher due to the fact that they reflect the GST collections on transactions in the month of March, which always has higher economic activity, he said.

Aditi Nayar, Chief Economist, Head – Research & Outreach, ICRA, said: “The Government of India’s (GoI’s) fiscal deficit marginally exceeded the Revised Estimate (RE) for FY2025 by Rs. 77 billion, albeit led by a welcome overshooting in capital expenditure, amid a less palatable miss on the receipts side being largely offset by considerable savings of ₹0.9 trillion in revenue expenditure in the fiscal. However, with the provisional estimate of the nominal GDP for FY2025 printing ~2% higher than the FAE for the fiscal that was used at the time of the Budget, the fiscal deficit was contained at 4.8 per cent of GDP, in line with the target for the year.

The upward revision in the FY2025 nominal GDP number also augurs well for meeting the deficit and debt-to-GDP targets for FY2026. “Despite a relatively lower projected nominal GDP growth of ~9.0% in FY2026 (ICRA’s expectations) vis-à-vis the budgeted levels of 10.1 per cent, the fiscal deficit-to-GDP ratio can be contained at 4.4 per cent in FY2026, while also accommodating a marginal fiscal slippage (to the tune of ~Rs. 300-350 billion), given the larger base. This, along with the additional cushion on the receipts side on account of the higher-than-budgeted RBI dividend transfer, provides comfort on the fiscal front amidst heightened global uncertainties,” she added.

Meanwhile foreign portfolio investors continue their buying spree.

Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said: FIIs have been buyers in autos, components, telecom and financials in the first half of May. India’s better-than-expected GDP growth in Q4 FY25 at 7.4 per cent is an indicator that growth is rebounding, and this can lead to a revival of corporate earnings in FY26. FIIs are likely to continue their investment in India. However, at higher levels they might sell since valuations are getting stretched.”

According to analysts, the Q4 results of India Inc are largely in line with expectations or better than expected.

According to Emkay Global Research, “The 4QFY25 earnings season broadly tracked our expectations, with PAT growth for the Nifty and BSE500 at 0.5% and 8.7%, reinforcing our constructive stance. The Nifty has rallied ~10% since Trump’s pause on 9 April. We view current Nifty levels as fundamentally supported, with further upside likely as the earnings cycle shows signs of inflection. Accommodative monetary mix of rate cuts, liquidity injection, and lending deregulation provide comfort. We maintain our key OW on Discretionary, Technology, and Telecom,” it added.

According to IFA Global Research, the highlight last week was the US international trade court ruling Trump-era tariffs are illegal, though the appeal upheld them, keeping the tariffs in place. The Fed’s preferred inflation gauge, headline PCE, came in at 2.1% YoY (vs. 2.2% expected), while Core PCE met expectations at 2.5%. Markets expect the Fed to hold rates steady through June and July, with the first rate cut likely in September or October. 

“Two cuts are currently priced in by the end of 2025. Meanwhile, President Trump met Fed Chair Powell, urging rate cuts. The key focus for the coming week will be the US May labour data, due Friday,” the research house said.

Published on June 2, 2025