Markets make optimistic start ahead of RBI’s policy outcome

Snapping six day losing streak, Indian equity benchmarks started the Wednesday’s trade on optimistic note, as traders went for value buying after recent drubbing. Investors will also look forward to the outcome of the Reserve Bank of India’s (RBI’s) monetary policy review due later in the day. The RBI is widely expected to keep its key rate on hold, but toughen its rhetoric as inflation has accelerated sharply. Traders took some encouragement with report that as many as 67 foreign direct investment proposals (FDI) worth Rs 117 billion were approved during the first nine months of the ongoing financial year. However, markets pared some of their initial gains to trade off day’s high, as traders remained concerned on report that India’s fiscal deficit is expected to come in at 3.5 percent of GDP in financial year 2018-2019 , as policymakers seek to promote economic growth by reducing the pace of fiscal consolidation. According to the report by BMI Research, a unit of Fitch Group, there is room for fiscal slippage as the government seeks to achieve its 7.5 percent growth target.

On the global front, Asian markets are trading mostly in green at this point of time retracing losses made in the last session, after major U.S. indexes finished their Tuesday session higher. Japanese Nikkei edged higher by around two percent as weaker yen lifted exporters’ shares. U.S. markets traded jubilantly and ended with a gain of around two percent on Tuesday, as traders went for short covering after previous session’s sell-off.

Back home, sugar stocks remained on buyers’ radar after the government doubled import duty on sugar to 100 per cent to protect domestic farmers. At present, customs duty or import tax on sugar is 50 per cent. Steel stocks too remained in focus after realising the importance of iron ore and coking coal to the competitiveness of steel making, the Union steel ministry said it wants to be consulted on all decisions concerning the two commodities. 

The BSE Sensex is currently trading at 34279.24, up by 83.30 points or 0.24% after trading in a range of 34277.51 and 34666.33. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 1.20%, while Small cap index was up by 2.16%.

The top gaining sectoral indices on the BSE were Realty up by 2.16%, Consumer Durables up by 1.66%, Basic Materials up by 1.58%, Industrials up by 1.58% and Oil & Gas was up by 1.44%, while IT down by 0.17% and TECK was down by 0.04% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 2.16%, Tata Motors up by 2.15%, Indusind Bank up by 1.64%, Dr. Reddys Lab up by 1.62% and Tata Steel up by 1.53%. On the flip side, NTPC down by 1.39%, Hindustan Unilever down by 1.10%, HDFC down by 0.83%, HDFC Bank down by 0.76% and TCS down by 0.71% were the top losers.

Meanwhile, with policymakers seeking to promote economic growth by reducing the pace of fiscal consolidation, the Fitch group company, BMI Research in its latest report has revised India’s fiscal deficit forecast to 3.5 percent of gross domestic product (GDP) for the fiscal year 2018-2019 (FY19) as against its earlier estimate of 3.3 percent. It also said that there is room for fiscal slippage as the government seeks to achieve its 7.5 percent growth target.

According to the report, Union Budget for FY19 (April-March) that was presented by Finance Minister Arun Jaitley on February 01, seeks to support growth and job creation at the expense of a slower pace of fiscal consolidation as policymakers aim to achieve a $5 trillion economy by 2025. The report also stated that while the Indian government loosened its central fiscal deficit target for FY19, it did not abandon its fiscal consolidation plans completely, but instead pushed its 3 percent fiscal deficit target back by a year to FY20.

Besides, the government outlined a fiscal deficit target of 3.3 percent of GDP in FY19 as against a revised estimate of 3.5 percent in FY18, indicating some fiscal consolidation, albeit at a slower pace than that recommended under the Fiscal Responsibility and Budget Management (FRBM) framework. Moreover, the FY19 budget saw a further increase in overall expenditure, with the biggest allocation going to transport, rural development, agriculture, education, and healthcare, as the key focus is supporting long term growth.

The CNX Nifty is currently trading at 10545.05, up by 46.80 points or 0.45% after trading in a range of 10533.40 and 10614.00. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were HPCL up by 4.49%, Hindalco up by 2.70%, Aurobindo Pharma up by 2.09%, Tata Motors up by 1.97% and Tata Steel up by 1.96%. On the flip side, NTPC down by 1.39%, Lupin down by 1.36%, Hindustan Unilever down by 1.08%, HCL Tech down by 1.05% and HDFC down by 0.93% were the top losers.

Most of the Asian markets are trading in green; FTSE Bursa Malaysia KLCI surged 25.97 points or 1.43% to 1,838.42, Jakarta Composite increased 66.16 points or 1.02% to 6,544.70, Taiwan Weighted soared 218.47 points or 2.1% to 10,622.47, Hang Seng added 386.29 points or 1.26% to 30,981.71 and Nikkei 225 up by 428.84 points or 1.98% to 22,039.08.

On the flip side, Shanghai Composite decreased 27.21 points or 0.81% to 3,343.44 and KOSPI Index down by 13.01 points or 0.53% to 2,440.30.