Markets to make cautious start of the F&O expiry session

Indian equity markets snapped a three-day losing streak on Wednesday, as PSU banks bounced back from recent heavy losses and IT stocks surged on the back of a weaker rupee. Today, the start of the F&O series expiry session is likely to be slightly in red, tracking weak global leads. Traders will also remain cautious on report that the country’s investment climate during April-December period of this fiscal looks subdued with declining figures in announcements of new projects and the number of projects under execution. The value of investment in new projects during April-December was Rs 4.43 trillion, less than half of Rs 9.21 trillion in the comparable period of last fiscal. Sentiments will also remain dampen on report that minutes from the Reserve Bank of India’s meeting this month showed monetary policy committee members expressing concerns about accelerating inflation, although that was also tempered by uncertainty about the strength of an economic recovery. However, traders will get some support later in the session from report that India’s Gross Domestic Product (GDP) growth in the third quarter of the current fiscal is likely to be in the range of 6.5-7 per cent and may expand further in following three months. The country’s GDP grew by 6.3 per cent in July-September quarter of the fiscal, up from 5.7 per cent in the first quarter. Meanwhile, foreign direct investment (FDI) in the country grew by a meagre 0.27 per cent to $35.94 billion during the first 9 months of the current fiscal. The FDI inflows were $35.84 billion during the April-December period of last fiscal, 2016-17.

The US markets ended lower on Wednesday after the minutes of the Federal Reserve’s January meeting indicated the central bank still plans to raise interest rates three times in 2018. The Fed raised its projection for inflation from anemic levels, saying that core personal consumption expenditure index would rise notably faster this year from its 1.5% rate in December. Asian markets were trading mostly in red as investors worried surging bond yields after the Fed’s latest comments on the economy will test equity valuations.

Back home, Indian equity benchmarks ended the Wednesday’s trade in green terrain with Sensex recapturing its crucial 33,800 level, while Nifty ending just shy of 10,400 mark, as traders opted to buy beaten down but fundamentally strong stocks after three days of continuous drubbing. After making firm start, markets turned choppy as 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. However, markets gained traction, as traders turned optimistic 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. Some support also came with foreign brokerage report that India’s medium-term potential growth is likely to be above 7 percent, backed by policy reforms, higher investments and stable global growth environment. The report added that India ranks higher in medium-term growth potential compared to other emerging markets like Brazil, Russia, Indonesia and China. Buying got accelerated in last leg of trade with market participants taking some encouragement with rating agency India Ratings and Research revising the outlook on infrastructure sector to stable for the next fiscal on signs of improvement in projects. The agency added that the infrastructure sector is showing signs of stability, although pockets of stress still linger. Moreover, the outlook for telecom has been revised to negative-to-stable from negative. The outlooks for thermal power, oil and gas, power, ports and airports remain unchanged. Finally, the BSE Sensex surged 141.27 points or 0.42% to 33,844.86, while the CNX Nifty was up by 37.05 points or 0.36% to 10,397.45.