Markets likely to make optimistic start

Indian equity benchmarks ended sharply lower on Friday, proving Thursday’s recovery short lived, as global equity markets continued to tumble on worries about rising inflation and higher interest rates. Today, the markets is likely to make optimistic start, taking support from firm global cues. Traders will take some encouragement with Reserve Bank of India (RBI) Governor Urjit Patel’s statement that stock market bubble will not cause any major problem. He also said transmission of RBI decisions by banks have improved now, partly aided by demonetisation. Some support will also come on report that India’s external debt has remained within manageable limits as indicated by the external debt indicators, and the country is not among the world’s top debtors. India’s external debt stock stood at $495.7 billion at quarter ending September 2017. Traders will also be getting some support with private report that retail inflation is expected to moderate and print at 5 per cent after rising consecutively for five months, helped largely by seasonal dip in vegetable prices, while trade deficit is also likely to improve, in January. There will be buzz in banking sector stocks on report that gross non-performing assets (NPAs) of banks declined marginally to 9.8 per cent at the end of September 30, 2017 from 10 per cent as on June 30, 2017. Infrastructure related stocks will be in focus on report that the Centre has released nearly Rs 9,940 crore to the states so far for the Smart Cities Mission, with Maharashtra accounting for the highest amount of Rs 1,378 crore, followed by Madhya Pradesh getting Rs 984 crore. There will be lots of important earnings announcements too, to keep the markets buzzing.

The U.S. markets edged higher on Friday, as traders reacted positively to news that lawmakers managed to end a brief government shutdown with a bill raising spending caps and funding the government until March 23rd. Asian markets were trading mostly in green, following a late Friday rally on Wall Street and the worst week in years for many global stock benchmarks.

Back home, resuming southward journey after a session’s halt, Indian equity benchmarks ended the session with a cut of over a percentage point, as global equity markets continued to tumble on worries about rising inflation and higher interest rates. After a gap-down start markets traded in red terrain throughout the session, as traders remained anxious with Former Reserve Bank of India (RBI) governor Duvvuri Subbarao’s statement that Finance Minister Arun Jaitley’s decision to relax on fiscal consolidation to give himself more room to spend is a questionable, and by far the most disappointing decision of the budget. He added that the finance minister inherited a fiscal deficit of 4.2% of GDP and he brought it down to 3.5%. But this was at a time when oil price was low and food prices were soft because of good monsoons. Sentiments remained dampened on report that foreign portfolio investors (FPIs) have turned wary on Indian shares again owing to the recent global market sell-off triggered by rising bond yields in developed markets including in the US and the euro zone. FPIs have sold shares worth Rs 3,665.6 crore in the domestic stock market (including provisional data of Wednesday and Thursday) in February after pumping close to Rs 13,000 crore into Indian equities in January. Traders failed to get any sense of relief with private report highlighting 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 also shrugged off 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. Finally, the BSE Sensex declined 407.40 points or 1.18% to 34,005.76, while the CNX Nifty was down by 121.90 points or 1.15% to 10,454.95.