Markets likely to make flat-to negative start

Indian markets edged lower on Wednesday, with weak cues from global markets as well as disappointing manufacturing and fiscal deficit numbers weighed on markets. Today, the start of the session is likely to be on negative side on weak global cues. Traders will also remain cautious with former RBI governor D Subbarao’s statement where he cautioned against India’s deficit challenge and said the country is no longer the sweet spot due to rising oil prices. Some anxiety will also persist during the trade after India reported a fiscal deficit of Rs 6.77 trillion ($103.72 billion) for April-January or 113.7 per cent of the target originally set for the fiscal year that ends in March. However, traders may get some support with  report that the Indian economy grew at five-quarter high of 7.2% in the October-December period reflecting overall recovery due to good show by agriculture, manufacturing, construction and certain services. The economy is expected to grow at 6.6% in the current fiscal ending March 31, as per the second advanced estimates of the Central Statistics Office (CSO), compared to 7.1% in 2016-17. The earlier estimate was 6.5%. The growth for the second quarter (July-September) has been revised upwards to 6.5%, from 6.3% estimated earlier by the CSO. Meanwhile, India’s core sectors grew at a faster clip in January from a year ago than in the previous month, with an uptick in cement, electricity, coal, refinery products and steel industries, indicating a strong start to the last quarter of 2017-18. The combined index of the eight core industries rose 6.7% in January compared to 4.2% in December 2017. Some support may also come with Prime Minister’s Economic Advisory Council Chairman Bibek Debroy’s statement that the economy is on the right track and the current expansion in the growth rate suggests that the reforms initiated by the government have started showing results.

The US markets closed sharply lower on Wednesday, as traders expressed uncertainty about the outlook for interest rates after new Federal Reserve Chairman Jerome Powell seemed to suggest that the Fed may raise rates more than the three times currently anticipated. Asian markets were trading mostly in red in early deals on Thursday following the weak lead overnight from Wall Street amid worries about interest rates. Japanese Nikkei edged lower as investors digested Japanese manufacturing PMI data that showed the manufacturing sector expanded at a slower rate in February.

Back home, extending their previous session’s downfall, Indian equity benchmarks ended the Wednesday’s trade in red terrain, with frontline gauges ending with a cut of around half a percent, declining below their crucial 10,500 (Nifty) and 34,200 (Sensex) levels. Markets made pessimistic start and traded in red terrain throughout the session, as traders remained on sidelines ahead of December quarter GDP data to be announced later in the day. Sentiments also remained downbeat with report that the collection of Goods and Services Tax (GST) slipped marginally to Rs 86,318 crore in January 2018 (received in January/February up to February 25, 2018), from Rs 86,703 crore in December 2017. Markets extended losses, as growth in India’s factory activity slowed to a four-month low in February as new orders eased and weighed on output after manufacturers raised prices at the fastest pace in a year. The Nikkei Manufacturing Purchasing Managers’ Index (PMI) fell to 52.1 in February from January’s 52.4. Markets made an attempt to pare losses and recovery was seen in second half of the session, but it proved short-lived and selling in dying hour of trade dragged markets lower. Sentiments remained dampened on report that the fiscal deficit for the April-January period stood at Rs 6.77 lakh crore. That is 113.7% of FY18 target, which means Modi government may not do any extra spending in the remaining two months of the year. The government outlined a fiscal deficit target of 3.3 per cent of GDP in 2018-19 as against a revised estimate of 3.5 per cent in 2017-18, indicating some fiscal consolidation, albeit at a slower pace than that recommended under the Fiscal Responsibility and Budget Management (FRBM) framework. Investors shrugged off Finance Minister Arun Jaitley’s statement that India’s economy has the potential to achieve a growth rate of more than 7-8 per cent in view of policy changes accompanied by a supportive global environment. He also said India will continue to remain one of the fastest growing economies in the world. Finally, the BSE Sensex shed 162.35 points or 0.47% to 34,184.04, while the CNX Nifty was down by 61.45 points or 0.58% to 10,492.85.