Markets to make flat-to-positive start

Indian equity markets succumbed to selling pressure for the third day running on Tuesday as worries intensified about fallout from a $1.77 billion fraud at Punjab National Bank and investors waited for the minutes of the latest Federal Reserve meeting for clues on the U.S. rate outlook. Today, markets is likely to make flat-to-positive start, as traders may go for bargain hunting after three successive days of losses. However, renewed selling by foreign investors on worries over the Rs 11,300 crore fraud case at Punjab National Bank (PNB), concerns over the government’s fiscal position and chances of another interest rate hike from the Federal Reserve in March may keep underlying sentiment cautious. Traders will get some solace with report that the Reserve Bank of India (RBI) has set up a five-member expert panel to look into the reasons for high divergence observed in asset classification and provisioning by banks. Meanwhile, Finance minister Arun Jaitley has come down heavily on public sector banks for not safeguarding taxpayers’ money spent to keep them afloat. He warned that the government would explore all options to punish the ‘cheats’ responsible for bank frauds. There will be buzz in software related stocks on report that India’s software services sector will see revenue growth of 7-9 percent in constant currency terms in the fiscal year to March 2019. The forecast, which was put out at the annual summit of the National Association of Software and Services Companies (NASSCOM), is in line with the 7.8 percent revenue growth it expects in the six months to the end of March 2018.

The US markets ended lower on Tuesday as traders digested recent volatility and expressed some uncertainty about the near-term outlook for the markets. Traders also remained reluctant to make more significant moves amid a quiet day on the U.S. economic front. Asian markets were trading mostly in green despite the softer lead stateside, with more convincing gains seen in Taiwan. The Japanese stock market recovered after a weak start and is modestly higher on Wednesday, with a weaker yen lifting exporters’ shares.

Back home, extending their losing streak for third straight session, Indian equity benchmarks settled in red terrain on Tuesday. After a cautious start markets gained momentum and traded in green for most part of the day with traders taking encouragement with Suresh Prabhu’s statement that the government will soon come out with a comprehensive strategy to increase the share of global trade to 40 percent of the gross domestic product (GDP), which is expected to touch $5 trillion by 2025. Some support also came with NASSCOM, the IT industry body enlightening that the Indian Information Technology industry expects to grow exports at a marginally higher 7-9 percent in the coming fiscal, slightly higher than its expected growth of 7.8 percent in the current financial year. In June last year, NASSCOM had said it expects growth of 7-8 percent this fiscal. It expects to add $14-16 billion in revenue in the coming year. However, sentiments turned pessimistic and sharp selloff in last leg of trade dragged markets lower. Traders turned cautious ahead of February Futures & Options (F&O) series to be expired on Thursday i.e. February 22, 2018. Traders also remained concerned after the government said the amount of money claimed by exporters as tax refunds under Goods and Service Tax (GST), from the time the regime came into force in July 2017, till December of that year, is Rs 55 billion. This is a major comedown from the Rs 65 billion that the Finance Ministry had announced last year as refunds claimed till October. Exporters continue to assert that thousands of millions worth of tax refunds are yet to be released by the authorities. Investors also took note that the GST Council, headed by Finance Minister Arun Jaitley, is likely to meet next week to decide on ease of compliance in filing the GST returns. Since the implementation of the GST on July 1, 2017, traders have been complaining about technical glitches in the GSTN, besides the complex process. Finally, the BSE Sensex shed 71.07 points or 0.21% to 33,703.59, while the CNX Nifty was down by 18 points or 0.17% to 10,360.40.