Markets to make pessimistic start on weak global cues

Indian shares witnessed bloodbath on Friday, as rising oil prices, fiscal deficit woes and the Budget proposal to levy long-term capital gains tax on equities raised concerns over reduced capital inflows into the stock market. Today, the start is likely to be on the negative side amid weak global cues. Traders will remained concerned with Fitch Ratings’ statement that high debt burden of the government constrains India’s rating upgrade, after Finance Minister Arun Jaitley projecting a fiscal deficit of 3.5 per cent of GDP against the earlier target of 3.2 per cent. Meanwhile, Arun Jaitley said that the economy has entered into a phase of consolidation after a series of structural reforms which were initiated in the past two years. Some support may come later in the day with Agriculture Secretary, SK Pattanayak’s statement that he is confident that the sector will continue to grow at over six percent in FY19. He also talked about the government’s plan to tap global market for agricultural products and added that the export policy on producing enough for domestic and cater to international markets is going to be put in place. Stocks related to chemical sector will be in focus after the government planning to impose antidumping duty on import of a chemical, used in industries like plastics, from four countries, including China, for three years to guard domestic players from cheap shipments. There will be lots of important earnings announcements too, to keep the markets buzzing.

The US markets witnessed slaughter on Friday and with major indices went home with a cut of over two percent, as traders remained concerned about higher interest rates came after the Labor Department released a report showing stronger than expected job growth and a jump in wages. Asian indices were trading in red following large declines in the U.S. and Europe on Friday. Also, investors were worried that rising inflation could prompt central banks to tighten monetary policy faster than expected.

Friday turned out to be an awful day of trade for Indian equity benchmarks, with frontline gauges tumbling below their crucial 10,800 (Nifty) and 35,100 (Sensex) levels, as traders took beating on the back of several announcements made yesterday in his speech by Finance Minister Arun Jaitley during Union Budget 2018. After making a gap-down opening, markets never looked confidant and extended their southward journey to end at day’s lows. The Finance Minister’s proposal to levy long-term capital gains tax (LTCG) on equities investments mainly dampened sentiment. This move may reduce incentive for investors to hold equities for longer term as the difference between tax on short and long term capital gains is only 5%. Besides, the imposition of a fresh tax on income from Mutual Funds could also have spooked investors. Sentiments also remained dampened on report that India’s fiscal deficit, for nine months of Financial Year 2018, stands at Rs 6,20,949 crore, overshooting the budgeted estimate (BE) target by 113.6%. The government has estimated Rs 5,46,532 crore of fiscal deficit for FY18 which during the same period of the last year stood negative at 93.9%. Markets extended southward journey after Fitch Ratings said that high debt burden of the government constrains India’s rating upgrade, a day after Finance Minister Arun Jaitley projecting a fiscal deficit of 3.5% of GDP against the earlier target of 3.2%. The report enlightened that weak public finances constrain India’s sovereign ratings, given a high general government debt burden of around 68% of GDP and a wide fiscal balance of 6.5% of GDP if states are included. Traders failed to draw any solace with Finance Minister Arun Jaitley’s statement that India’s $2.5 trillion economy is now firmly on course to register a strong growth rate of over 8% and indicated that the country has grown on an average of 7.5% in the first three years of the Modi government. Finally, the BSE Sensex tumbled 839.91 points or 2.34% to 35,066.75, while the CNX Nifty was down by 256.30 points or 2.33% to 10,760.60.