Markets likely to make positive start on firm global cues

Indian markets fluctuated before finishing modestly higher on Tuesday, as traders covered short positions after recent string of losses. Today, the start of the session is likely to be on the positive side tracking firm global cues, as investors look ahead to interest-rate announcements from the Federal Reserve and the Bank of England. There will be some concern with report that a private investment bank has downgraded India’s economic forecasts from 8 per cent to 7.6 per cent for Financial Year 2018-19. It, however, retained growth forecast for FY 2019-20 at 8.3 per cent. The investment bank lowered the growth projection in the wake of multi-billion banking scam and warned that it could spark tighter regulation of the banking sector that would constrain credit growth. Some anxiety will also persist with former governor of Reserve Bank of India Raghuram Rajan’s statement that India should be thinking of the next 10 to 20 years when it would need a massive push to create jobs. He said, 7.5 percent growth is not enough to employ the 12 million people coming to the labor force every year in good jobs. There will be buzz in sugar stocks after the government scrapped export duty on raw and refined sugar to boost shipments, as the country is all set to produce record 29.5 million tonnes (MT) of the sweetener in the current 2017-18 marketing season. Export duty on sugar was 20%.

The US markets closed higher on Tuesday amid expectations the Federal Reserve and new Chair Jerome Powell will soothe investors’ concerns that interest rates will rise too fast. Asian markets were trading mostly in green on Wednesday, following modest rebounds in Europe and the U.S. that partially reversed Monday’s global declines. However, gains remained capped as traders remained on sidelines ahead of the outcome of US Federal Reserve policy meeting.

Back home, snapping four days losing streak, Indian equity benchmarks ended the choppy day of trade with marginal gains, as traders opted to buy beaten-down but fundamentally strong stocks after four days of continuous drubbing. After making a cautious start, markets gained momentum and entered into green terrain, as traders took some encouragement with Reserve Bank of India’s (RBI) release stating that the country’s manufacturing sector witnessed an improvement in sales growth in the third quarter this fiscal on annual basis, though net profit has remained subdued due to lack of support from other income. The sales of manufacturing companies increased by 14% in the October-December quarter of 2017-18 compared to similar period of the previous fiscal while net profit declined by 2.4% in the third quarter. Some support also came with Former Reserve Bank of India (RBI) Governor Raghuram Rajan’s statement that India can achieve a growth rate of 10%. He added that some key reforms are needed to accelerate India’s Growth Rate. Some support also came with ICRA’s report that the credit to micro, small and medium enterprises (MSMEs) is expected to grow at 12-14% over the next five years, helped by higher lending by non-banking finance companies (NBFC) to the segment. As on March 2017, credit to MSMEs stood at Rs 16 trillion. However, gains remained capped with Bibek Debroy’s statement that India’s net exports are not doing well even as the global economy is on the recovery path. Debroy further highlighted that India is facing a dilemma from the point of view of pushing exports, as exporters would like exchange rate to depreciate, however exchange rate might not depreciate as much as exporters want because of capital inflows. Besides, investors remained on sidelines looking forward to the latest developments in the parliament following the no-confidence motion moved by Telugu Desam Party (TDP) after it broke away from the BJP-led NDA following the Centre's refusal to grant Special Category status to Andhra Pradesh. Finally, the BSE Sensex surged 73.64 points or 0.22% to 32,996.76, while the CNX Nifty was up by 30.10 points or 0.30% to 10,124.35.