Markets to make negative start on weak global cues

Indian markets declined on Thursday after the U.S. Federal Reserve raised interest rates by 25 basis points while reiterating its plan to raise rates gradually. Today, the start of the session is likely to be on the negative side tracking weak global cues, as traders remained worried on fears of a potential trade war. Traders will also remain concern on private report stating the country’s current account deficit (CAD) is likely to treble to $10-12 billion in the fourth quarter of the current financial year, against the same year-ago period, due to higher trade deficit. The current account deficit had increased to $13.5 billion, or 2 per cent of the gross domestic product (GDP) in the third quarter as well, against $8 billion, or 1.4 per cent of GDP in the same year-ago period. Traders may get some solace later in the day with report that  monsoon rains in India are likely to be unaffected by the El Nino weather pattern, which is likely to set in only after the four-month rainy season ends in September. Monsoon season delivers about 70 percent of India’s annual rainfall and is key to the success of the farm sector, which accounts for about 15 percent of India's $2 trillion economy but sustains nearly two thirds of the country’s 1.3 billion people. There will be buzz in textile related stocks on report that the Textile Ministry will set up an inter-ministerial committee and allocate it a sum of Rs 1,000 crore to promote research & development (R&D), technology transfer and training in the sector.

The US markets closed sharply lower on Thursday, as traders remained concerned about the impact of a potential trade war after President Donald Trump announced tariffs on at least $50 billion worth of Chinese imports. Asian markets were trading in red on Friday, tracking sharp falls in U.S. and European stocks, which took a hit on fears of a potential trade war.

Back home, Thursday turned out to be a dismal day of trade for Indian equity markets with frontline gauges ending the session with a cut of around half a percent, after the US Federal Reserve raised interest rates while retaining its view for three hikes this year. In its first policy meeting under new Fed chief Jerome Powell, the US central bank indicated that inflation should finally move higher after years below its 2% target and that the economy had recently gained momentum. Markets, however, started the session on an optimistic note as traders took some encouragement with report that private equity (PE) investments witnessing 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, the Union Cabinet has given its approval for revision of the agreement between India and Qatar for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income. But traders pared early gains and markets entered into red terrain in second half of the session to end lower. Selling in banking counters too dampened sentiments, as traders shrugged off S&P Global Ratings’ report stated 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 believes its deep protracted credit down cycle is nearing, with a turnaround by fiscal 2020. In addition, government and RBI’s significant steps are aiding the recovery. Sell off in telecom stocks too weighed sentiments on report that telecom operators including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm have been served notices for exaggerated credit claims under the goods and services tax. Finally, the BSE Sensex declined 129.91 points or 0.39% to 33,006.27, while the CNX Nifty was down by 40.50 points or 0.40% to 10,114.75.