Markets make pessimistic start ahead of RBI policy outcome

Indian equity benchmarks made pessimistic start and are trading in red in early deals on Wednesday, as traders remained on sidelines ahead of 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. Traders also remained cautious 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.

Weak global cues too dampened sentiments with Asian markets trading mostly in red, 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. 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.

Back home, 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. In scrip specific developments, Yes Bank edged higher on collaborating with Moody’s Analytics to provide credit certification to its Credit Management employees, while Tata Communications edged higher on entering into partnership with DRVR.

The BSE Sensex is currently trading at 32727.67, down by 74.77 points or 0.23% after trading in a range of 32701.20 and 32804.75. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index slipped 0.08%, while Small cap index was up by 0.27%.

The top gaining sectoral indices on the BSE were Energy up by 0.50%, Realty up by 0.39%, Consumer Durables up by 0.31%, IT up by 0.25% and TECK was up by 0.16%, while Metal down by 1.66%, Basic Materials down by 0.63%, Auto down by 0.55%, PSU down by 0.38% and Bankex was down by 0.35% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.27%, Cipla up by 0.56%, Infosys up by 0.51%, Coal India up by 0.51% and Kotak Mahindra Bank up by 0.31%. On the flip side, Tata Steel down by 2.09%, SBI down by 1.28%, Hero MotoCorp down by 1.17%, Bajaj Auto down by 1.10% and ITC down by 0.83% were the top losers.

Meanwhile, with focus on boosting the exports of goods and services and to increase employment generation and value-addition in the country, the Union government released mid-term review of the much awaited Foreign Trade Policy (FTP) (2015-20). The mid-term review of FTP is aimed at mid-course correction, to address working capital issues and provide measures to arrest declining shipments. It was to be announced on July 1, together with the implementation of the goods and services tax (GST) regime. But the announcement was postponed to take into account feedback from the export sector regarding GST-related issues.

The mid-term review of the FTP has brought in additional relief for the labour-intensive and micro, small and medium enterprises (MSME) sectors. The government has increased the incentives under the Merchandise Exports from India Scheme (MEIS) increased by 2 percent to 4 percent. Similarly, under the Services Export from India Scheme (SEIS), incentives have been increased by 2 percent. The validity for duty credit scrips raised to 24 months from 18 months, to allow duty-free imports for export on self-certification.

Commerce and Industry Minister Suresh Prabhu has said that the increase in annual incentive by 34 percent to Rs 8,450 crore will benefit leather, handicraft, carpets, sports goods, agriculture, marine, electronic components and project exports. The FTP will provide additional annual incentive of Rs 749 crore for the leather sector, Rs 921 crore for hand-made carpets of silk, handloom, coir, jute products, Rs 1,354 crore for agri products, Rs 759 crore for marine products, Rs 369 crore for telecom, electronic components, Rs 193 crore for medical equipment. He added that green shoots in export growth are distinctly visible now with positive export growth in 13 of the past 14 months.

The government also proposed a higher level of incentives for export of agriculture products under FTP. The FTP also sought to establish an Export Promotion Mission to provide an institutional framework to work with State Governments to boost India’s exports. The government also aimed to promote and boost export of defence goods. Besides, an e-wallet system to address the liquidity problem being faced by exporters is likely to be operational from April 01, 2018. The government has expressed hope that the GST would help to push exports growth.

The CNX Nifty is currently trading at 10083.70, down by 34.55 points or 0.34% after trading in a range of 10076.30 and 10104.20. There were 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 1.13%, Tech Mahindra up by 0.93%, HCL Tech up by 0.55%, Cipla up by 0.48% and Infosys up by 0.37%. On the flip side, Hindalco down by 2.96%, Vedanta down by 2.84%, Tata Steel down by 2.03%, SBI down by 1.28% and Bajaj Auto down by 1.15% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 tumbled 369.92 points or 1.64% to 22,252.46, Hang Seng declined 361.16 points or 1.25% to 28,481.64, Taiwan Weighted dropped 140.75 points or 1.33% to 10,426.10, KOSPI Index decreased 24.44 points or 0.97% to 2,485.68, Shanghai Composite shed 19.91 points or 0.6% to 3,283.77 and FTSE Bursa Malaysia KLCI was down by 4.17 points or 0.24% to 1,720.67.

On the flip side, Jakarta Composite was up by 35.55 points or 0.59% to 6,036.03.