Markets to make a weak start reacting to Bihar election results

The Indian markets after a choppy trade had ended modestly in red in last session, today the start is likely to be weak in a knee-jerk reaction to the Bihar state election outcome, where the ruling party in the centre has conceded crushing defeat. Traders are likely to be more concerned now on increased political opposition for key reforms such as the Goods and Services Tax (GST). Also, there is report that exports of top five sectors including engineering and petroleum fell by about 31 per cent to $ 13.6 billion in September due to slump in global demand. Only pharmaceuticals sector managed to register a growth of 9 per cent in September. Markets may see some stabilization in the latter half and can even attempt some recovery, supported by a survey from industry body Assocham, which has said that majority of Indian businesses are optimistic about the state of the economy improving in the next two quarters, although the last six months have not witnessed much of a change at the ground level. Also, as the Union Minister Jayant Sinha has expressed hope that GST will be rolled out from next fiscal. There will be some buzz in the PSU oil marketing companies, as the government has hiked excise duty on petrol by Rs 1.60 per litre and the same on diesel by 40 paisa a litre to mop up additional revenue to meet budgetary targets. Also, petroleum minister Dharmendra Pradhan has said that the government is considering a proposal to remove cooking gas subsidy for those earning above a certain threshold.

The US markets ended mostly in green in last session on getting good jobs data. The Asian markets have made a mixed start with Chinese and Japanese markets extending their surge with gains of over two percent in early deals, as the yen has weakened and the Chinese exports posted fourth monthly drop raising hopes of more stimulus. Overseas shipments of China dropped 6.9 percent in October in dollar terms.

Back home, Indian equity benchmarks ended the choppy day of trade slightly in red on Friday, as investors remained cautious ahead of Bihar election verdict after exit polls showed a neck-to-neck fight between NDA and JDU-led grand alliance in Bihar. If the grand alliance of JDU-RJD-Congress gains an edge, market could see some temporary suffering. Sentiment remained subdued with RBI Governor Raghuram Rajan’s statement that the central bank is comfortable with the current level of policy rates till more room builds up, even as the government expressed hope for further cuts. However, losses remained capped with the Prime Minister Narendra Modi’s statement that the economy had performed better on all parameters, including inflation and foreign investment in the past 17 months and laid stressed on effecting inclusive reforms to improve people’s lives, rather than only grabbing headlines. He also said the government’s efforts to bring back black money stashed abroad had detected as much as Rs 10,500 crore. Global cues too remained sluggish, as European counters made a weak start, while Asian markets ended mostly in red. Banking stocks remained on buyers’ radar after PSU banks viz. State Bank of India (SBI) and Punjab National Bank (PNB) reported better-than-expected numbers. SBI has reported 25.11% rise in its net profit at Rs 3879.07 crore for the quarter ended September 30, 2015 as compared to Rs 3100.41 crore for the same quarter in the previous year, while PNB reported 7.94% rise in its net profit at Rs 621.03 crore for the quarter Q2FY16. Meanwhile, the power and power-related stocks remained buzzing after the government unveiled Ujwal Assurance Yojana (UDAY) to wipe out discoms' losses by FY19. As per the scheme, state governments will be urged to take over 75 per cent of discoms' debts. The scheme has placed various constraints on the ability of discoms to incur new losses. Finally, the BSE Sensex declined by 38.96 points or 0.15% to 26265.24, while the CNX Nifty lost 1.15 points or 0.01% to 7954.30.