Markets to make negative start on weak global cues

Indian shares fell for a fifth consecutive session on Monday tracking weak cues from global markets, after a strong U.S. jobs report for January helped fuel expectations that the Federal Reserve will lift borrowing costs more than the three times initially expected this year. Today, the start is likely to be on the negative side amid weak global cues. Traders will also look ahead to the RBI’s policy review meeting to start later in the day amid expectations that the central bank will tighten its monetary policy stance in the wake of growing concerns over fiscal slippage. Investors may remain concern on private report that lower indirect tax revenue collections may outweigh any upside risks from higher nominal GDP growth, non-tax revenue and direct tax collection. Meanwhile, Finance Secretary Hasmukh Adhia said that while implementing GST, the government has sacrificed revenue in the hope that compliance would improve in the future. He said, the organised sector has gained in the process and the improvement is evident in companies’ balance sheets. Market participants may get some relief with Finance Minister Arun Jaitley’s statement that expediting public services and ensuring fairness in procurement will supplement rapid economic growth in the South Asian region including India. Sugar stocks will remain in focus after the food ministry has proposed doubling of the import duty on sugar to 100 per cent to curb cheaper imports, check falling wholesale prices of sweetener and ensure timely payment to cane farmers. There will be lots of important earnings announcements too, to keep the markets buzzing.

U.S. stocks suffered sharp sell-off on Monday, as markets continued to throw a tantrum over rising interest rates. The sell-off overshadowed any corporate headlines. Markets also ignored some upbeat economic news. Asian markets were trading with severe cut after Wall Street suffered its biggest decline since 2011 as investors’ faith in factors underpinning a bull run in markets began to crumble.

Back home, bears took full control over Dalal Street on Monday, with frontline gauges settling below their crucial 34,800 (Sensex) and 10,700 (Nifty) levels, as traders opted to stay away from risky assets ahead of Reserve Bank of India’s (RBI’s) monetary policy meeting to be start from tomorrow. Markets, after a gap-down start, traded with pessimism throughout the session, as traders remained concerned that Union Budget could push up inflation and prompt the central bank to raise interest rates soon. sentiments also remained dampened 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. Besides, the US-based agency had kept India’s sovereign rating unchanged at ‘BBB-’, the lowest investment grade with stable outlook, citing weak fiscal position. Traders failed to get any sense of relief with report that the Indian service sector remained in expansion mode in January, registering the fastest rise in activity in three months driven by a renewed increase in new business orders. The seasonally adjusted Nikkei Services Business Activity Index improved to 51.7 in January, up from 50.9 in December. Traders took note of industry body ASSOCHAM’s report stating that the RBI should not over-react to high yield pressures in the bond market and should refrain from hiking interest rates in its next monetary policy review outcome on February 7. ASSOCHAM enlightened in a post-Budget paper that some of the macro indicators, including pegging of higher fiscal deficit of 3.3% for 2018-2019 and 3.5% of the GDP for the current fiscal, look difficult, but reaction of the bond market would ease out soon. Meanwhile, DEA Secretary Subhash Chandra Garg said that achieving a double-digit economic growth for India in current global scenario is difficult but the country is on path to clock 8% plus expansion by 2020-21. Garg added that achieving double digit growth is difficult as the growth in the global economy is not that high. Finally, the BSE Sensex tumbled 309.59 points or 0.88% to 34,757.16, while the CNX Nifty was down by 94.05 points or 0.87% to 10,666.55.