Benchmarks likely to make an optimistic start

Indian equity markets settled into green terrain on Thursday, as positive global cues and easing inflation worries helped outweigh a selloff in Punjab National Bank (PNB) shares for the second straight session. Today, the start is likely to be on positive side tracking firm global cues. However, disappointing trade balance data and worries over the Rs 11,300 crore fraud case at PNB may keep underlying sentiment cautious to some extent. India’s merchandise trade deficit for January widened from a year ago. The visible trade deficit increased to a 56-month high of $16.30 billion in January from $9.90 billion in the same month last year as export growth slowed down and imports of precious stones and crude oil surged. Exports grew an annual 9.07 percent while imports jumped 26.10 percent. Traders will remain little concerned with the IMF’s statement that the tax collection assumptions in India’s budget is ambitious but there is a need to look into the fiscal implications of some of the initiatives that are presently unfunded. Driven by a slowdown in bond issuance, the growth of India’s debt capital markets moderated by three per cent in the current year with a growth of 16 per cent in the value of corporate bonds outstanding by December end. Meanwhile, media reports suggest that as many as 17 banks lent about Rs 3,000 crore to various firms of Nirav Modi, the man at the center of the alleged $1.77 billion banking fraud at PNB. There will be lots of important earnings announcements too, to keep the markets buzzing.

The U.S. markets edged higher to extend their recent winning streak to five sessions on Thursday, as traders largely shrugged off further indications of rising inflation even though the data could lead to faster interest rate hikes by the Federal Reserve. Asian equities were trading higher on the last day of the week, tracking gains on Wall Street, but trading in the region was subdued with many markets shut for the Lunar New Year holiday.

Back home, Thursday turned out to be a fabulous day of trade for Indian equity benchmarks, with frontline gauges settling just shy of their crucial 10,550 (Nifty) and 34,300 (Sensex) levels. Markets after an optimistic start gained momentum and traded jubilantly on private report that the RBI’s revised framework for quicker and time-bound resolution of stressed assets is a long-term positive for banks. The report stated that the new framework has the potential to bring about a big change in the approach of banks to monitor their exposures and resolution of NPAs. Markets managed to reconquer their psychological 10,600 (Nifty) and 34,500 (Sensex) levels in noon deals after India's inflation on wholesale level softened for the second consecutive month in January 2018. Wholesale price inflation (WPI) stood at 2.84 percent (provisional) in January as against 3.58 percent (provisional) for the previous month and 4.26 percent during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 2.30 percent compared to a build-up rate of 4.55 percent in the corresponding period of the previous year. Despite some profit booking in last leg of trade, markets managed to end the session with a gain of around half a percent as sentiments remained up-beat with Chief Economic Advisor Arvind Subramanian’s statement that although India has made a lot of progress towards achieving financial inclusion, a lot more needs to be done. He added that providing essential goods and services to citizens was only the first policy step towards financial inclusion. Meanwhile, a private report highlighted that consumption is reviving as the effect of demonetization fades and companies get used to the Goods and Services Tax (GST), with some recording multi-quarter highs in volume and sales in the October-December period, exceeding street expectations. Finally, the BSE Sensex surged 141.52 points or 0.41% to 34,297.47, while the CNX Nifty was up by 44.60 points or 0.42% to 10,545.50.