Markets to make gap-down opening on global selloff

Indian markets rallied on Thursday as the oil market downturn eased investors’ concerns surrounding inflation and rising twin deficits. Today, the markets is likely to make gap-down opening, as global equity markets continued to tumble on worries about rising inflation and higher interest rates. Back on domestic turf, traders may get some relief later in the day with private report that fears of the Reserve Bank of India going for a rate hike are overdone and there is still room for a 25 bps rate cut in the August monetary policy review, provided rains are normal. Traders may also take some comfort with Nasscom’s report that outlook for the Indian information technology (IT) sector is cautiously positive in 2018 as challenges remain amidst prospects of greater IT spending with global and US economies improving. There will be some buzz in stocks related to public sector banks (PSBs) with India Ratings and Research stating that PSBs may need capital of Rs 2.06 trillion for a credit growth of the 8-9 per cent in the financial year 2019. Telecom stocks will be in focus after the telecom regulator has sought views on whether airwaves for public mobile radio trunking (PMRT) service -- used in disaster relief, emergency response, public safety and some large industries -- should be allocated by the government or auctioned. Stocks related to sugar space will be in focus after the central government has put a ceiling on the amount of sugar mills can sell by imposing significant minimum stocks for the next two months to check falling prices.

U.S. stocks witnessed bloodbath yet again and settled with a cut of around four percentage points on Thursday, as traders grew concerned about inflation and higher interest rates. Moreover, traders shrugged off some upbeat corporate earnings. Asian markets were trading in deep red, following another day of steep falls on Wall Street. The Japanese stock market is sharply lower on Friday after the safe-have yen strengthened again.

Back home, snapping seven days of losing streak, Indian equity benchmarks ended the session with a gain of around a percentage point, with frontline gauges recapturing their crucial 34,400 (Sensex) and 10,550 (Nifty) levels, as traders opted to buy beaten down but fundamentally strong stocks after seven sessions of continuous drubbing. After opening mildly in green markets gained momentum, as traders also took some encouragement with ASSOCHAM chief’s statement that the Reserve Bank of India’s (RBI’s) decision to keep the policy rate unchanged is on the expected lines, though the less than hawkish stance has come about as a relief for the industry which had even feared a possible hike in the lending rates, following inflationary concerns. A sharp fall in oil prices also eased investors’ concerns surrounding inflation and rising twin deficits. The EIA’s Short-Term Energy Outlook predicted that US oil production would top 11 million barrels per day this year. Sentiments also got boost by a report that India’s oil refining capacity is set to jump 80%, or by 194 MT, by 2030 as state refiners, Reliance Industries and Rosneft line up expansion plans, undeterred by the renewables explosion, hoping to meet future demand. Traders also got some support with report that the CBDT has directed the taxman not to undertake ‘coercive’ steps in recovering pending taxes from startups under a specific provision of the Income Tax Act, a move aimed to help budding entrepreneurs in the country. Meanwhile, Moody’s said that the global green bond issuances are likely to surge by 60 per cent to a record $250 billion this year, with India and China leading the emerging markets in this space. However, markets pared some of their gains in last leg of trade, as anxiety spread among the traders with the exporters’ body, Federation of Indian Export Organisations’ (FIEO) statement that liquidity problems emanating from delay in refund of Goods and Services Tax (GST) is forcing exporters to turn down new orders. It also noted that micro, small and medium enterprises (MSMEs) are cutting their workforce due to cash crunch. Finally, the BSE Sensex surged 330.45 points or 0.97% to 34,413.16, while the CNX Nifty was up by 100.15 points or 0.96% to 10,576.85.