Markets to make positive start on firm global cues

Indian markets gave up early gains to end sharply lower on Wednesday amid persisting worries about global trade war. Today, the markets are likely to make positive start on Thursday, tracking firm global cues. Traders will be getting support with report that the trade deficit between India and the US dropped by almost six per cent in 2017 compared to the previous year, even as it continued to harp on issues such as market access and high tariffs on several American products being imported into India. Some support will also come from NITI Aayog CEO Amitabh Kant’s statement that the government has been able to save Rs 83,000 crore through direct benefit transfer (DBT) scheme. He said that advantages of digitization are so enormous in making India a progressive, effective society. Traders will also take some encouragement with private weather forecasting agency Skymet’s forecast that Monsoon in India is likely to be normal with no chances of drought this year. The forecaster said there were 5 per cent chances of excess rainfall that is more than 110 percent of long-period average (LPA). The average, or normal, rainfall in the country is defined between 96 and 104 per cent of a 50-year average for the entire four-month monsoon season. Meanwhile, the government said India’s prospects to become a top steel exporter depends on a range of factors, including competitiveness and demand, and will not be impacted by the trade barriers the US has put on imports.

Stocks showed a substantial turnaround over the course of the trading session on Wednesday after moving sharply lower at the open. The rebound on Wall Street came as traders shrugged off trade war concerns after China issued a list of 106 U.S. products that will be subject to additional tariffs. Asian markets are trading mostly in green as investors welcomed signals the U.S. and China are open to negotiations rather than escalating threatened tit-for-tat trade tariffs.

Back home, Wednesday’s session turned-out to be a dismal day of trade for Indian equity benchmarks, where frontline gauges ended the day with a cut of over a percent, breaching their crucial 33,100 (Sensex) and 10,150 (Nifty) levels, as trade war fears escalated after China announced 25% tariff on 106 products in 14 categories imported from the US, including soybeans, automobiles and chemicals. Markets started the session on positive note with traders taking some encouragement from Finance Minister Arun Jaitley’s statement that direct tax collection has grown by 18 per cent to cross Rs 10.02 trillion in the financial year ended on March 31, 2018. He said demonetisation and GST implementation have resulted in higher formalisation of the economy which is evident from additional 10 million IT returns being filed in the previous financial year. The sentiments also remained upbeat on private weather forecasting agency report that monsoon rains in India are expected to be average in 2018, raising prospects of higher farm and economic growth in the $2 trillion economy. The report added that monsoon rains are expected to be 100 percent of the long-term average. However, markets pared all of their initial gains and entered into red terrain as traders turned anxious on report that the Reserve Bank of India (RBI) is unlikely to yield to the India Inc’s pressure for a benign monetary policy stance by keeping policy rates unchanged in its first monetary policy review of 2018-19 to be announced on Thursday against the backdrop of hardening global crude oil prices. Some concerns also came with the Andhra Pradesh government’s statement that the Centre ‘grossly failed’ in effectively implementing the Goods and Services Tax and accused it of ‘sidetracking’ the new taxation system. The market participants also took note of Chief Economic Advisor Arvind Subramanian’s statement that it is easy to advocate one uniform GST rates for all goods, but it cannot be done ignoring political realities. Finally, the BSE Sensex declined 351.56 points or 1.05% to 33,019.07, while the CNX Nifty was down by 116.60 points or 1.14% to 10,128.40.