Markets likely to make negative start on feeble global cues

Indian markets fell for a second consecutive session on Friday to join a global sell-off as increased fears of a global trade war dented investor sentiment and spurred demand for safe-haven assets. Today, the start of the session is likely to be on the negative side tracking weak global cues. Traders will also remain concern on Assocham’s report that the escalation of global trade protectionist measures into a full-scale global trade war will damage the Indian economy as well. A full-scale global trade war will impact the country’s exports and enlarge its current account deficit (CAD). Ficci has said India should play a proactive role in defusing the emerging possibilities of a global trade war that can derail the positive outlook in the world trade. Moreover, former Reserve Bank of India Governor Raghuram Rajan said the global economic recovery could be hit if the trade war between the US and China escalate. Investors may also remain anxious on report that the country’s foreign exchange reserves decreased marginally by $152.4 million to $421.334 billion in the week to March 16, on account of a fall in foreign currency assets. In the previous week, the reserves had increased by $728.9 million to $421.487 billion. The reserves had touched a life-time high of $421.914 billion on February 9, FY18. Meanwhile, markets regulator SEBI is considering to come out with new norms on share buyback programme, under which maximum limit for share repurchase will be 25 per cent of the company’s paid-up capital and other reserves.

The US markets ended their worst week in more than two years on Friday after China threatened to respond in kind to President Trump’s imposition of $60 billion in tariffs on Chinese imports. Asian markets are trading mostly lower on Monday, following a global sell-off late last week amid fears that rising tensions between the United States and China could lead to a full-blown trade war.

Back home, Indian equity benchmarks witnessed bloodbath on Friday with frontline gauges tumbling below their crucial 10,000 (Nifty) and 32,600 (Sensex) levels, 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. Markets started the session with a huge gap on down side and traded in a particular range throughout the day, as sentiment remained dampened on ICRA’s 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. Investors took note of a private report which said that handling the emerging frauds in the banking sector coupled with likely ripple effects, muted GST collections and the protectionist policy imposed by the US are some of the factors that are likely to keep risk to growth elevated. As per its economic forecast for March 2018, the report added that the government faces a challenging scenario of managing the growth momentum. Sentiments also remained downbeat, as another private report highlighted that India has emerged as one of the Asian economies most vulnerable in an environment of rising interest rates in the US. Traders took note of Commerce Minister Suresh Prabhu’s statement that the world is facing serious challenges as the US is taking protectionist measures and India needs to explore ways to boost exports. Traders shrugged off 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. Finally, the BSE Sensex declined 409.73 points or 1.24% to 32,596.54, while the CNX Nifty was down by 116.70 points or 1.15% to 9,998.05.