Markets to make a cautious start, likely to see recovery in latter trade

The Indian markets plummeted in the last session on geopolitical worries; with across the board selling dragging the major benchmarks lower by over a percent. Today, the start is likely to remain cautious on subdued global cues, however things may improve with the progress of trade as there are expectation that Prime Minister Narendra Modi would unveil the much-awaited stimulus package during a scheduled speech to the BJP national executive meeting later today. The Chief Economic Adviser Arvind Subramanian has said that the economy is facing multiple headwinds and there is a need to attack them on various fronts. Arvind Subramanian has been tasked with preparing details of the pressure points facing the economy and the probable remedies. Also, there will be some support with a statement from Finance Ministry ahead of the Reserve Bank of India’s (RBI) bi- monthly monetary policy decision to be announced on October 4 that there is scope for an RBI rate cut at the next policy review as retail inflation continues to be low. Meanwhile, the RBI has eased rules governing foreign investment in corporate bonds by excluding rupee-denominated securities from its overall debt limit. There will be some buzz in the insurance stocks, as a report from industry body Assocham has said that the insurance industry in the country is undergoing multiple disruptions in its functioning and the trend will accelerate in the future.

The US markets extended their lackluster trade in the last session and made a mixed closing on geopolitical concerns amid an escalating war of words between North Korean leader Kim Jong Un and President Donald Trump. The Asian markets have made mostly a lower start though firm crude oil prices figure are preventing too much damage. The Japanese market was up as yen declined on speculation Japan’s prime minister will press for a stimulus package alongside his expected call for a snap election later in the day.

Back home, Indian equity benchmarks witnessed absolute carnage on Friday and went home with a cut of around one and a half percent, breaching their crucial 32,000 (Sensex) and 10,000 (Nifty) levels. After a gap-down opening, markets never looked confident of recovering and gradually extended their losses till end to close near intraday lows on renewed geo-political worries after a report that North Korea could respond to fresh sanctions with a hydrogen bomb in the Pacific. Back on domestic turf, sentiments remained dampened on expectations that the government’s plan for a stimulus to halt an economic slowdown may have a negative impact on the fiscal deficit. Market participants also remained concerned with report that the Organisation for Economic Co-operation and Development (OECD) trimmed India’s growth forecast for the current financial year, citing the temporary impact of the rollout of the Goods and Services Tax (GST) and demonetization, expecting the economy to expand at a slower pace than China. OECD said India’s economy will likely grow 6.7% in FY18, lower than its estimate 7.3% in June. The Paris-based group of 35 advanced and emerging countries cut its forecast for India’s growth to 7.2% in FY19 from 7.7% estimated earlier. Meanwhile, traders failed to get any sense of relief with report that the government is considering a plan to loosen the fiscal deficit target so that it could spend an additional Rs 500 billion ($ 7.7 billion) in the financial year ending in March 2018. Traders also paid no heed to reports that given the lack of considerable space both on the monetary and fiscal front to support economic growth, part of the country’s forex reserves can be used to support GDP numbers. Finally, the BSE Sensex tumbled 447.60 points or 1.38% to 31,922.44, while the CNX Nifty was down by 157.50 points or 1.56% to 9,964.40.