Markets to extend weakness on soft global cues

The Indian markets as usual initiated the southward journey of the global equity markets and slumped in last session. Today, the start of the penultimate session of the February F&O series and the rail budget is likely to be in red, tailing the slump in the global markets. Traders will be concerned with Moody's Investors Service’s statement that India's fiscal metrics will remain weaker than its peers in the near term even if Finance Minister Arun Jaitley was to stick to fiscal consolidation roadmap. It said that the government's fiscal deficits have reduced over the last five years, and this has supported the stabilisation of government debt ratios. Without fiscal consolidation going forward, India's government finances will continue to compare poorly to peers. Meanwhile, the industry body Ficci has said that Indian economy is expected to grow at 7.4 percent in the current fiscal, slightly lower than 7.6 percent projected in advance estimates of Central Statistics Office. However, there will be some support too, with President Pranab Mukherjee, in a joint sitting of Parliament at the start of the Budget session, stating that India is a haven of stability in an increasingly turbulent global economy. GDP growth has increased making India the world's fastest growing economy among large economies. There will be some buzz in the steel stocks, on report that the steel production has fallen by 1.5 percent to 7.4 million tonnes (MT) in January 2016 compared with the output in the same month last year. The railways related stocks will remain in action a day ahead of the Rail Budget. 

The US markets suffered sharp slump in last session, following a rally of previous day, the decline of the day was partially contributed by the profit taking and partially by the drop in crude oil prices. The Asian markets have made mostly a weak start with some indices trading lower by around a percent, with revival in demand for low-risk assets once again. The Japanese market too was in red despite the yen steadying against the dollar.

Back home, Tuesday’s session turned out to be a disappointing session for the Indian benchmarks which crumbled like a ‘house of cards’ and went on to breach various key technical levels in the over one and half  percent freefall. The frontline indices which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the downward journey only halted with the session’s close. Sentiments turned pessimistic on report that exports of over half of the sectors, out of the 30 closely monitored by the Commerce Ministry, were in the negative zone in January due to a fall in global prices and demand. Investors were also jittery ahead of the government's 2016/17 budget, which is due on February 29, though hopes are high that policymakers will deliver a fiscally responsible budget that nonetheless steers spending to key areas such as infrastructure. Sentiments weakened further after Moody’s Investors Service stated that India’s fiscal metrics will remain weaker than its peers in the near term even if the Finance Minister Arun Jaitley was to stick to the fiscal consolidation roadmap. The global credit rating agency added that the importance of the upcoming Budget 2016 lies in its message on the government’s fiscal consolidation plans. Meanwhile, foreign institutional investors (FIIs/FPIs) continued their selling spree on Monday as well, and were net sellers of Indian equities worth Rs 656.93 crore, indicting diminishing trust over market fundamentals. On the global front, Asian markets ended mostly lower, while the European shares too retreated on Tuesday, with falling commodities prices. Back home, after making a flat but positive start, Indian benchmark indices dropped into the red terrain sooner than later, lacking any significant upside cues. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The steep fall turned even acute after the opening of European markets in the noon trades, as one negative report after another from the continent kept creating havoc for the local bourses. Finally, the BSE Sensex plunged by 378.61 points or 1.59% to 23410.18, while the CNX Nifty dropped 125.00 points or 1.72% to 7,109.55.