Markets to see some recovery on supportive regional cues

The Indian markets slumped in the last session after the RBI maintained status quo in its policy review, traders were concerned about it raising the inflation estimate to 4.3-4.7 percent, from the earlier projection of 4.2-4.6 percent, for the second half of the current financial year.  However it retained the growth forecast at 6.7 percent for 2017-18 even through the gross value added (GVA) in the second quarter rose to 6.3 percent. Today, the start is likely to see some recovery on positive regional cues and traders will be analyzing the policy outlook of the RBI where it sounded confident of the economy achieving its previous growth estimate of 6.7 per cent on a gross value-added basis, with risks evenly balanced. Marketmen will also be getting some support with former Reserve Bank of India Governor YV Reddy’s statement that amid uncertainties in the global economic order, a sense of optimism about the future is more in India than in other parts of the world. Meanwhile, at a meeting with Finance Minister Arun Jaitley in the run-up to the last full-year Budget of the NDA government before 2019 general elections, India Inc. has sought lower tax and more incentives for investments while exporters called for quicker GST refunds.

The US markets once again made a mixed closing in the last session and the major averages spent the day bouncing back and forth across the unchanged line, as traders expressed uncertainty about the economic impact of the Republican tax reform plan. The Asian markets have made mostly a positive start bouncing back from their longest losing streak as the recent rout in global stocks abated. The Japanese market was up by over a percent as the yen weakened.

Back home, Indian equity benchmarks ended the Wednesday’s trade in red terrain as Reserve Bank of India (RBI) decided to keep the policy repo rate unchanged. Sentiments remained downbeat since morning as markets after a negative start never looked confidant and extended their southward journey to end below their crucial 32,600 (Sensex) and 10,050 (Nifty) levels. Traders remained concerned with report that public debt of the central government rose by 2.53% to Rs 65.65 lakh crore in the July-September quarter compared to the previous quarter. Internal debt constituted 93% of public debt at end-September 2017, while marketable securities accounted for 82.6% 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. Markets extended southward journey after RBI’s Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0% but has raised the inflation forecast for remainder of the current financial year to 4.3-4.7%. The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth. Sentiments also remained dampened on reports that India's economy though showed signs of recovery in Q2FY18 but overall business sentiment in the country during the same period got hit by the new Goods and Services Tax (GST) regime. As per the National Council of Applied Economic Research’s (NCAER) latest survey, its Business Confidence Index (BCI) fell 12.9% from the earlier quarter and 11.1% on year-on-year basis, due to GST. Finally, the BSE Sensex declined 205.26 points or 0.63% to 32,597.18, while the CNX Nifty was down by 74.15 points or 0.73% to 10,044.10.