Indian equity benchmarks reversed half of their previous session's gains to end lower by around half a percent on Monday, as traders remained concerned on trade worries and political uncertainty in Germany. Markets made a cautious start and turned negative with report of the Reserve Bank of India stating that India's external debt stood at $529.7 billion at the end of March 2018, recording an increase of $58.4 billion year-on-year, primarily on account of a rise in commercial borrowings, short-term debt and non-resident Indian (NRI) deposits. Sentiments also remained dampened with India's foreign direct investment (FDI) growth rate hitting five-year low of 3% at in 2017-18. Markets extended losses to hit intraday lows in noon deals as sentiments weighed on reports that India's fiscal deficit has exceeded 55% of the Budget estimate in just first two months (April-May) of the current Year (FY19), though it is still lower than what was recorded in the same period last fiscal. According to the Controller General of Accounts (CGA) data, fiscal deficit during the same period of the previous financial year had stood at 68.3%. The selling got intensified and markets even went to test their psychological 35,100 (Sensex) and 10,600 (Nifty), but key gauges got strong support near those levels and managed to prune some of their losses to end off day lows. Traders got some relief with the country's manufacturing sector activity in June, which grew at the strongest pace this year, supported by rise in domestic and export orders. The Nikkei India Manufacturing Purchasing Managers Index (PMI) rose from 51.2 in May to 53.1 in June, registering the fastest improvement since December 2017. Some solace also came with Finance Secretary Hasmukh Adhia's statement that the revenue collection under the Goods and Services Tax (GST) during the month of June 2018 increased to Rs 95,610 crore, as compared to previous month's revenue of Rs 94,016 crore. Finally, the BSE Sensex declined 159.07 points or 0.45% to 35,264.41, while the CNX Nifty was down by 57.00 points or 0.53% to 10,657.30.

The US markets ended slightly higher for third straight day on Monday following a report from the Institute for Supply management showing growth in U.S. manufacturing activity unexpectedly accelerated in the month of June. The ISM said its purchasing manager's index climbed to 60.2 in June after rising to 58.7 in May, with a reading above 50 indicating growth in manufacturing activity. Street had expected the index to edge down to 58.4. The increase in the ISM manufacturing index in June is a clear sign that, for now at least, the strength of the domestic economy is more than offsetting any increased uncertainty on trade policy. Meanwhile, with an increase in spending on residential construction partly offset by a drop in spending on non-residential construction, the Commerce Department's report showed that U.S. construction spending climbed by slightly less than expected in the month of May. The Commerce Department said construction spending rose by 0.4 percent to an annual rate of $1.310 trillion in May after advancing by 0.9 percent to a revised $1.305 trillion in April. Street had expected construction spending to increase by 0.5 percent compared to the 1.8 percent jump originally reported for the previous month. The Dow Jones Industrial Average gained 35.77 points or 0.15 percent to 24307.18, the S&P 500 rose 8.34 points or 0.31 percent to 2726.71 and the Nasdaq was up by 57.38 points or 0.76 percent to 7567.69.

Crude oil futures ended lower on Monday and snapped four straight sessions of gain, as traders weighed expectations for higher global output. Further, sentiment also remained weak as President Donald Trump said that Saudi Arabia might raise production by up to two million barrels a day. Saudi Arabia saw the biggest monthly jump in production since July of 2013-up 330,000 barrels a day in June to 10.3 million a day. Overall OPEC output rose by 30,000 barrels a day to 31.83 million. Benchmark crude oil futures for August delivery dropped 21 cents or 0.3 percent to settle at $73.94 a barrel on the New York Mercantile Exchange. September Brent crude fell $1.93 or 2.4 percent at $77.30 a barrel on London's Intercontinental Exchange.

Indian rupee ended considerably weaker against the US dollar on Monday, on fresh bouts of dollar demand from importers. The rupee came under pressure due to extremely bullish dollar sentiment overseas coupled with sluggish equity markets.  Market participants also remained worried on a report of Department of Industrial Policy and Promotion (DIPP) which highlighted that India's foreign direct investment (FDI) growth rate hit five-year low of 3% in 2017-18. According to the latest data of the Department of Industrial Policy and Promotion (DIPP) inflows grew by only 3% to $44.85 billion in 2017-18. There was also caution among investors with reports that India's fiscal deficit has exceeded 55% of Budget estimate in first two months of FY19. On the global front, dollar edged higher on Monday, closing in on last week's one-year high, as investors ramped up bets that escalating trade tensions between the U.S. and its trade partners will hurt the world's biggest economy the least for now. Finally, the rupee ended at 68.79, 32 paise weaker from its previous close of 68.47 on Friday.

The FIIs as per Monday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 8513.00 crore against gross selling of Rs 6774.60 crore, while in the debt segment, the gross purchase was of Rs 993.33 crore with gross sales of Rs 955.49 crore. Besides in the hybrid segment, the gross buying was of Rs 0.80 crore against gross selling of Rs 1.81 crore.

The US markets ended higher on Monday following the release of a report from the Institute for Supply management showing growth in U.S. manufacturing activity unexpectedly accelerated in the month of June. Asian markets were trading mostly in red on Tuesday, with greater China markets extending their declines as investor worries over Beijing's trade relations with the U.S. soured sentiment in the region. Indian equity markets ended lower on Monday amid weak trend across Asia and Europe as Germany faced political crisis over immigration. Today, markets likely to make flat-to-positive start, though the undertone is likely to remain cautious ahead of the July 6 deadline when the United States is due to impose the tariffs on Chinese exports. Traders may get some support with Finance Minister Piyush Goyal's statement that India will be able to restrict the fiscal deficit below the budgeted level of 3.3 per cent of GDP in 2018-19, which has hit 55 per cent of the annual target in the first two months of the financial year. Traders may also get some boost with Commerce Minister Suresh Prabhu's statement that early data indicate that exports have registered a good performance in June despite volatility in global markets. The official export numbers for the month of June will be released on July 15. Market participants may also get some respite with, retail inflation for industrial workers remained flat at 3.96 per cent in May compared to 3.97 per cent in April this year. Meanwhile, India has agreed to provide tariff concessions on 3,142 products to the six member nations of the Asia Pacific Trade Agreement (APTA) effective from July 1. However, there will be some cautiousness on report that growth in output of the crucial eight core industries declined to a 10-month low of 3.6 per cent in May due to a fall in the pace of growth of steel, cement as well as contraction in crude and natural gas. This might have an adverse impact on the index of industrial production (IIP) as core industries have 40 per cent weightage in the index.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Eicher Motors' motorcycle division has reported 18% rise in sales at 74,477 units in June 2018 as compared to 63,160 motorcycles sold in June 2017. 
• Coal India has reported provisional production of 44.88 million tonnes in June 2018, as against a target of 52.79 MT. 
• Dr. Reddy's Laboratories is recalling over 2.36 lakh bottles of Atorvastatin Calcium tablets, used for lowering cholesterol from the US market due to failed impurities/degradation specifications. 
• M&M's Farm Equipment Sector has reported domestic sales of 39,277 units during June 2018, as against 31,660 units sold in June 2017, registering a growth of 24%.