The Indian markets kept losing pace through the day after a positive start and ended with cuts of over a quarter percent in the last session, as the RBI’s 25 bps repo rate cut and no change in cash reserve ratio fell short of market expectations. Today, the start is likely to remain somber and the weakness may extend amid the soft global cues. Traders will ponder rate outlook, a day after the RBI maintained its neutral stance, citing record low inflation. Most of the market participants are not expecting any further rate cut this year, saying the present low inflation print is not sustainable. However, the Bankers have said the RBI's move to cut its policy rate by 0.25 percentage point would help boost credit demand, improve investor sentiment and propel growth. Traders will also be getting some support with Finance Minister Arun Jaitley’s indications that there could be scope for rationalisation of rates under the Goods and Services Tax (GST) as its implementation progresses. Jaitley also said that he was under pressure to change the GST Network which people said was faulty but felt the structure was correct. Additionally, John Chambers, Chairman of the newly-formed US-India Strategic Partnership Forum, predicted that India would turn out to be a role model for the world economies. He said India will figure among the top three economic powers in the world over the next 10-15 years. There will be some buzz in the telecom sector, on report that the government may soon consider the telecom industry’s demand of doing away with telecom circles and will work towards the concept of one nation, one network and one licence. There will be lots of important earnings during the day to keep the markets in action.
The US markets made mostly a positive close in the last session and the, Dow notched a psychological milestone at 22,000, highlighting a steady record ascent for the blue-chip benchmark. The Asian markets have made mostly a negative start, with investors assessing the strength of company earnings before American labor-market data provides the latest clues on the health of global growth. The Japanese market too was down as the yen rose against the dollar.
Back home, Indian equity benchmarks retreated from record highs and ended the session with a cut of around one third of a percent on Wednesday, as Reserve Bank of India’s (RBI’s) decision to lower the policy rate by 25 bps to 6% failed to boost sentiment. This was the first rate cut since October 2016 and the interest rate is now at a 6-year low. No change in cash reserve ratio (CRR) too dampened sentiments. Though, markets started the session on positive note, as traders took some encouragement with Minister of State for Finance Santosh Kumar Gangwar’s statement that the government has collected over Rs 1.80 lakh crore in direct tax till July 15 in the current fiscal, an increase of 21.4% year-on-year, ‘belying’ fears of slowdown in economic activities. The current growth rate is higher than the target rate of 15.32% required to achieve the Budget Estimate. Meanwhile, Finance Minister Arun Jaitley has said that the GST Council, at its next meeting later this week, will finalise a mechanism to operationalise anti-profiteering clause which seeks to protect consumers’ interest. GST Council comprising state finance minister will meet on August 5 to take stock of implementation of GST which was rolled from July 1. However, markets turned red and extended fall despite the announcement of a 25 basis points cut in the repo rate by RBI, as the markets appear to have already factored in a quarter percentage point rate cut. Traders also remained concerned after finance minister Arun Jaitley cautioned that the fiscal deficit of states may rise this year, with states likely to tap the markets to raise funds to finance farm debt waivers. Some cautiousness also came with the Central Electricity Authority’s (CEA) statement that about 7% of India's coal-fired power plants may never be able to comply with new environmental norms because they lack the space to install emission-cutting equipment, potentially leading to their shutdown. Finally, the BSE Sensex shed 98.43 points or 0.30% to 32,476.74, while the CNX Nifty was down by 33.15 points or 0.33% to 10,081.50.
