Markets to extend somberness reacting to trade deficit data

The Indian markets continued their slide and lost over a quarter percent in the last session, traders were concerned with likely fiscal slippages on rising crude prices and upward pressure on both consumer and wholesale inflation. Today, the start is likely to remain weak and the sluggishness will extend amid negative global cues. On the domestic front traders will be concerned with trade deficit widening to its highest in nearly three years in October, as export growth contracted for the first time after more than a year. The trade deficit widened to $14.02 billion last month from $8.98 billion in September. Merchandise exports for October fell 1.12 percent from a year earlier to $23.1 billion, dropping for the first time since August 2016. There will be buzz in the market with report that government could be looking to come out with detailed anti-profiteering guidelines. The broad idea is to prescribe a methodology to ascertain whether companies are passing on GST reductions and benefits derived from input tax credits to consumers. The realty sector stocks will see some  action with industry body Assocham stating that if the real estate sector is brought within the ambit of GST, it should be along with the stamp duty and moderate rate, and should not add to the cost of housing and construction. There will be lots of important earnings announcements to keep the markets buzzing.

The US markets despite coming off their worst level of the day ended in red in the last session on lingering uncertainty about the outlook for the Republican tax reform proposal, as the House prepares to vote on their bill later this week. The Asian markets have made mostly a soft start and some of the indices are down by over half a percent as concern grows that stocks have become too expensive amid uncertainty about US tax reform. Signs of an oversupply in commodities have led to fall in the commodities stocks in the region.

Back home, Indian equity benchmarks ended the lackluster day of trade in red terrain on Tuesday with frontline gauges breaching their crucial 33,000 (Sensex) and 10,200 (Sensex) levels, as traders remained concerned with retail inflation accelerating more than expected in October. Inflation quickened to 3.58 percent in the month, the fastest pace in seven months, from 3.28 percent increase in September. Consumer inflation rise was mainly due to an increase in prices of consumer food items. The inflation data showed that the Consumer Food Price Index (CFPI) - an indicator for food prices - also rose to 1.90% in October from 1.25% in September. Traders also remained cautious with rising crude prices and tax relief on some items under the Goods and Services Tax (GST) which is expected to threaten the government’s fiscal targets on back of possible dip in revenues. Giving hint of further rationalization of GST rates, Finance Minister Arun Jaitley has said that there is scope for further rationalization of GST rates and revenue buoyancy will decide the course of rationalization. The rising crude will also prevent the Reserve Bank of India from cutting interest rates any further. Markets tried to recoup their losses in second half of trade but selling in dying hour of trade dragged markets near intraday lows, as sentiments turned down-beat after India’s inflation on wholesale level picked up in the month of October due to increase in prices of food and fuel products. According to the latest data released by the government, the wholesale price inflation (WPI) climbed to 3.59% in October 2017 from 2.60% in September 2017 and 1.27% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 2.03% compared to a build up rate of 3.53% in the corresponding period of the previous year. Investors failed to get any sense of relief with a private report that business confidence in the country during the ongoing quarter has improved on account of government measures, macroeconomic boost and festive season demand, among others. The index stood at 76.7 during October-December of 2017, an increase of 6.4% from the preceding three months. The index, however, fell 4.1% against the corresponding three months a year ago. Finally, the BSE Sensex declined 91.69 points or 0.28% to 32,941.87, while the CNX Nifty was down by 38.35 points or 0.38% to 10,186.60.