Markets to make optimistic start on Thursday

Indian markets extended northward journey on Tuesday for second straight session ahead of outcome of the US Federal Reserve policy meet. Today, the start of the session is likely to be on the positive side tracking firm regional cues, as the Fed raised overnight rates by 25 basis points, in line with market expectations. Traders will get some encouragement with report that private equity (PE) investments witnessed a two-fold jump in February with transactions worth $1.3 billion taking the deal tally for the first two months of this year to $2.3 billion. There were 62 PE deals worth $1,330 million, while in the corresponding period last year there were 45 such transactions worth $588 million. Meanwhile, Reserve Bank Governor Urjit Patel and five other experts on the MPC will take a call on changing interest rate in the backdrop of declining retail interest rate when they meet here on April 4-5 to decide the first bi-monthly monetary policy of the next fiscal. There will be buzz in the PSU banks after S&P Global Ratings’ report that the banking sector could witness a turnaround in fiscal 2019-20. The report added that the banking sector’s performance will get a boost from economic expansion and we believe its deep protracted credit down cycle is nearing, with a turnaround by fiscal 2020. In addition, governments’ and RBI’s significant steps are aiding the recovery.

The US markets closed lower on Wednesday after the Federal Reserve upgraded its economic outlook and increased interest rates. The central bank also increased its rate-hike forecast for next year. Asian markets were trading mostly in green on Thursday, after the U.S. Federal Reserve raised rates by 25 basis points to a range of 1.5 percent to 1.75 percent on Wednesday, as was widely expected.

Back home, extending previous session’s rally, Indian equity benchmarks ended the Wednesday’s trade in green terrain with frontline gauges recapturing their crucial 10,150 (Nifty) and 33,100 (Sensex) levels, ahead of outcome of the US Federal Reserve policy meet. The Fed is expected to raise interest rates at its first policy meeting under Chairman Jerome Powell and may signal more hikes are coming in response to tax cuts and government spending that could further stoke a robust US economy. Markets started the session on an optimistic note as traders took some encouragement 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. Rajan enlightened that India could achieve even 10% growth if it built infrastructure, cleared the way for companies, eased the way for them to do business, and improved the quality of human capital including healthcare and education. Traders also get some support with a foreign brokerage report that India remains vulnerable in its external position, but this does not pose any concern about the country’s macro stability and is quite manageable. The report added that India’s CAD doubled from 0.7% of GDP in 2016-17 to 1.4% in 2017-18 and the widening of CAD is likely to continue in the next financial year as well albeit at a slower pace. However, market participants pared some of their early gains in second half of the trade as traders turned little anxious on 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. Finally, the BSE Sensex surged 139.42 points or 0.42% to 33,136.18, while the CNX Nifty was up by 30.90 points or 0.31% to 10155.25.