Markets to make a soft-to-cautious start on weak macro data

The Indian markets snapping their three days gaining streak ended considerably lower in the last session, ahead of the macro data on inflation and industrial output. Today, the start is likely to be somber, as in a double whammy to the economy, industrial output growth slowed down to 2.2 percent in October while retail inflation soared to 15-month high of 4.88 percent in November. Traders will be more concerned with the spike in inflation, as the higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon. Meanwhile, the Finance Ministry has concluded that several businesses have claimed high transitional input tax credit under the GST regime without any bonafide explanation to back such claims. Traders however may get some support with a private survey report, stating that India is the third most optimistic nation in hiring intentions as 22 percent of employers are expected to add more staff in the next three months. It further said that workforce gains were expected across all seven industry sectors monitored and in all four regions. Tourism and hotel stocks will be in focus on a tourism ministry report that more than 10 lakh foreign tourists visited India in November 2017, a rise of 14.4 per cent over the same period last year. FTAs during the period between January and November this year were 90.01 lakh, with a growth of 15.6 per cent over the same period the previous year.

The US markets made a mixed closing in the last session, with the S&P 500 and Dow ending at fresh at records for a fourth consecutive session, while tech heavy Nasdaq ending marginally in red. Traders were cautious with the start of the central bank’s Federal Open Market Committee two days meeting. The Asian markets have made a mixed start and some of the indices are down by about half a percent, with investors awaiting central bank decisions in Europe and America for clues on the policy path for next year.

Back home, Tuesday turned out to be a dismal day of trade for Indian equity benchmarks with frontline gauges breaching their crucial 10,250 (Nifty) and 33,300 (Sensex) levels, as traders opted to book profit after three day of continuous rally. After a feeble opening, markets never looked confidant and extended their southward journey to at day’s lows, as traders remained on sidelines ahead of Index of Industrial Production (IIP) data for October and inflation data based on consumer price index (CPI) for November to be released later in the day. A private poll showed that India’s retail inflation likely breached the central bank’s 4% medium-term target in November after unseasonably heavy rains sent food prices soaring. The poll enlightened that the higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon. Traders failed to get any sense of relief with the UN DESA's World Economic Situation and Prospects 2018 report, which said that despite a slowdown observed in early 2017, the outlook for India remains positive, underpinned by strong private consumption, robust public investments and structural reforms. Selling got accelerated in second half of trade, as traders failed to hold their nerves. Sentiments remained pessimistic with report that foreign investors offloaded shares worth of over Rs 4,000 crore from domestic equity markets this month so far on account of rising crude prices and widening fiscal deficit. Investors took note of ASSOCHAM report enlightening that the government needs to accord top priority to agriculture in the budget as a major shortfall in kharif production resulted in sluggish growth of farm sector in the second quarter this fiscal. While the year-to-year agriculture Gross Value Addition (GVA) growth for the July-September quarter of 2017-18 dropped to 1.7% from 4.1%, measured on basic prices, the fall looks quite sharp at current prices from 10% to 3.7%. Meanwhile, with the farm loan waiver pitch getting shriller by the day, former RBI governor Y V Reddy has said that the practice is not good for economic or credit culture and insisted that ultimately it is a political decision and cannot be justified in the longer run. Finally, the BSE Sensex declined 227.80 points or 0.68% to 33,227.99, while the CNX Nifty was down by 82.10 points or 0.80% to 10,240.15.