Markets to make pessimistic start on weak global cues

Indian equity benchmarks ended lower on Tuesday, as traders opted to stay away of investing in risky assets ahead of upcoming budget, as this will be the last full year budget of the government before next year’s Lok Sabha election. Today, the start is likely to be on the lower side, tracking weak global cues. Traders might remain on sidelines ahead of upcoming budget to be released on February 1, 2018. Though, traders may get some support with ratings agency Moody’s statement that this recently introduced goods and services tax (GST) mechanism is still a work in progress that will ultimately result in formalisation of economy. It added that it was a necessary step to help banks and such reforms should continue. Meanwhile, Chief Economic Adviser (CEA) Arvind Subramanian argued that the estimated GDP growth for the next fiscal in the Economic Survey 2017-18 is based on the pre-assumed crude oil prices. Traders may also get some support with report that India has been ranked sixth in the list of wealthiest countries with total wealth of $8,230 billion, while the United States topped the chart. Stocks related to infrastructure, power and petroleum will be buzzing after a high powered committee headed by telecom secretary and consisting of secretary road transport and highways, power, petroleum and member (engineering) rail board has been formed to look into modalities of government to government sharing of infrastructure for setting up utilities such water pipes, telecom and power cables and national highways. There will be lots of important earnings announcements to keep the market buzzing for the day.

The US markets ended mostly in red on Tuesday due to profit taking, with traders cashing in on the recent strength of the markets. Traders were also looking ahead to the Federal Reserve’s monetary policy announcement on Wednesday. Asian indices were trading mostly lower across the board in early deals after Wall Street sold off for a second consecutive day, although losses in the region were initially slighter than those seen stateside.

Back home, Tuesday turned out to be a daunting day of trade for Indian equity benchmarks, with frontline gauges settling below their crucial 36,100 (Sensex) and 11,050 (Nifty) levels. Markets kick-started the session on pessimistic note, as traders remained concerned over valuations after recent strong gains. Traders also remained on sidelines ahead of upcoming budget, as this will be the last full year budget of the government before next year’s Lok Sabha election. Afterwards, markets traded in a tight band throughout the session, as sentiments remained dampened with Chief Economic Adviser Arvind Subramanian’s statement that the scope for the Reserve Bank of India (RBI) to lower interest rate may be limited with growth picking up and inflation hardening. He added however that it would be inappropriate for him to comment on rate cut as it is the domain of the RBI. Traders also remained nervous with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the government may settle for slightly higher fiscal deficit in 2018-19 as well. The government aims to restrain the fiscal deficit for 2017-18 to 3.2% of the GDP and 3% in 2018-19. Some anxiety spread among the investors after yesterday’s Economic Survey, while painting a bright picture for India’s short and medium term growth, pointed out some pitfalls. It enlightened that despite better-than-expected GST revenue growth, India is headed for some fiscal slippage and could miss the target of 3.2% of GDP. The survey also added that agriculture income may fall by up to 25% in the medium term because climate change will hit crop yields, making it imperative to replace power and fertilizer subsidies by direct income support and to drastically expand irrigation. Market participants shrugged off report that Securities and Exchanges Board of India (SEBI) may tighten net worth norms, bring in new shareholding rules and ease directorship conditions for stock exchanges, depositories and clearing corporations. Finally, the BSE Sensex declined 249.52 points or 0.69% to 36,033.73, while the CNX Nifty was down by 80.75 points or 0.73% to 11,049.65.