Markets to extend the somberness with a soft start on weak global cues

The Indian markets losing their pace in final hours ended with cuts of about half a percent in last session. Today, the start is likely to be a bit soft on weak global cues, however trade may see some recovery with traders getting support from IMF’s statement that India's strong reform push in 2016 is welcome and should continue apace. Adoption of the goods and services tax is poised to boost India's medium-term growth. It added that as shown by India, progress on reforms could ignite business investment (including already strong FDI inflows), further boosting domestic demand. Meanwhile, the Commerce Minister Nirmala Sitharaman lauded the increase in foreign direct investment (FDI) in India but said it will be meaningful only when it translates into increased job creation. Sitharaman said the government was now working towards adding infrastructure capabilities in tier-III cities and rural areas for the benefits of increased foreign investment to percolate down. There will be buzz in the telecom stocks, as the India's biggest auction of telecom spectrum ended on a whimper note with just Rs 65,789 crore of bids coming in over five days against an expectation of Rs 5.6 lakh crore, leaving nearly 60 percent of airwaves, including premium 4G bands, unsold.

The US markets made a flat closing in last session as traders looked ahead to the release of the Labor Department's closely watched monthly jobs report on Friday. Traders even overlooked the Labor Department’s report showing a modest drop in initial jobless claims in the week ended October 1st. The Asian markets have made mostly a weak start and some of the indices are down by over half a percent in early deals after a sudden plunge in the pound spooked investors ahead of American jobs data.

Back home, Indian benchmark indices reversed their earlier gains to end lower on Thursday, as investors turned jittery after weak opening of European markets. All eyes are now on the European Central Bank, which will release the minutes of the latest policy meeting. Yesterday the local market came under pressure on the report that the European Central Bank could start winding down its quantitative-easing program ahead of schedule. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory to extend their southward journey for second straight day despite getting off to a gap-up opening. Sentiments remained subdued with International Monetary Fund’s (IMF’s) report that countries such as India have taken steps to reduce non-performing loans, but stressed that additional and more timely actions is needed. The IMF report also warned of rising medium-term risks and said global financial stability will now depend on how well financial institutions adapt to the new era of low growth and low interest rates. Also, India's service activity lost steam in September after touching a three year high last month. The seasonally adjusted Nikkei India Services Business Activity Index was down to 52.0 in September from August’s 43-month high of 54.7, the latest reading pointed to a slower rate of expansion that was moderate overall. Besides, weakness in Indian rupee against the dollar too dampened sentiments. However, losses remained capped as the RBI Governor Urjit Patel signaled a marked departure in policy approach from his predecessor’s unwavering focus on price stability. He said that the NPA situation is an important issue for the RBI in India. We will be dealing with it with firmness but also with pragmatism so that the economy does not feel any lack of credit. Some support also came in from report that foreign portfolio investors (FPIs) bought shares worth a net Rs 243 crore on October 05, 2016.