Markets to make a soft start; RBI policy review eyed

The Indian markets despite showing some recovery in the late hours ended marginally in red in the last session, traders remained concerned about the rising fiscal deficit. Today, the start of the important day is likely to remain soft on weak global cues and all eyes will be on RBI monetary policy outcome later today, after a two-day policy meeting, the RBI is widely expected to keep its policy rate on hold, citing concerns about inflation and fiscal deficit. There will be some concern with report that public debt of the central government rose by 2.53 per cent to Rs. 65.65 lakh crore in the July-September quarter compared to the previous quarter. Internal debt constituted 93 per cent of public debt at end-September 2017, while marketable securities accounted for 82.6 per cent of public debt. Meanwhile, the newly-constituted 15th Finance Commission held its first meeting and decided to involve think-tanks in drawing up its report that will primarily deal with devolution of revenue between the Centre and states. The exporters will see some action as part of its mid-term review of the foreign trade policy (FTP) for 2015-20, the government has announced fresh incentives worth Rs 8,450 crore a year to exporters. The revised FTP provides for across the board increase of 2 percent in existing Merchandise Exports from India Scheme (MEIS) for exports by MSMEs/labour intensive industries, involving additional outgo of Rs 4,567 crore.

The US markets ended in red in a late hour sell-off and the Dow pulled back off the record closing high set in the previous session. There were concerns about the outlook for the Republican tax reform bill amid reports about disagreements over a corporate alternative minimum tax. The Asian markets have made mostly a soft start led by the Japanese market which is down by around a percent as commodities companies led declines following a rout in copper prices and as investors assessed the impact of proposed tax cuts.

Back home, Indian equity benchmarks ended the Tuesday’s trade with marginal losses as traders remained on the sidelines ahead of the outcome of two-day policy review by the Reserve Bank of India (RBI) beginning today. The RBI is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth. Markets started the session on pessimistic note, as sentiments remained dampened after global rating agency Fitch Ratings pared India’s growth forecast for this financial year to 6.7% from 6.9% estimated earlier citing lower than expected recovery in the second quarter. For 2018-19, the credit rating agency has cut the forecast to 7.3% from 7.4% earlier. Sentiments also weighed down with India’s services sector growth losing momentum in the month of November, as sustained pain from the country’s Goods and Services Tax (GST) regime triggered significant decline in demand and lower customer turnout. The seasonally adjusted Nikkei Services Business Activity Index fell to 48.5 in the month of November from 51.7 in the month of October. The Nikkei India Composite PMI Output Index, which measures both manufacturing and services, was also down to 50.3 in November from 51.3 in October. However, recovery in final hour of trade helped markets to pare most of their early losses and end only with marginal cut, as traders drew some solace on report that Finance Secretary Hasmukh Adhia has called a meeting of tax officials from the Centre and States on December 9, to assess the trend in revenue collections from the GST and review measures to further boost compliance. Finally, the BSE Sensex declined 67.28 points or 0.20% to 32,802.44, while the CNX Nifty was down by 9.50 points or 0.09% to 10,118.25.