Markets likely to make negative start on feeble global cues

Indian equity benchmarks ended higher on Thursday as trade war fears ebbed and investors cheered reports of early arrival of monsoon. Today, the markets are likely to make cautious start amid sluggish global cues. Traders will react on Moody’s Investors Service’s statement that India could prune its capital expenditure to avoid any slippage of its fiscal deficit target of 3.3% of GDP in the current fiscal, but warned any reduction in the excise duty on petroleum products would exert negative pressure on the country’s sovereign credit profile. There will be buzz in stocks related to public sectors banks (PSBs) on report that Finance Minister Piyush Goyal will meet heads of PSBs based out of western and southern regions tomorrow to resolve various issues concerning them. Meanwhile, the International Monetary Fund (IMF) has said addressing the ongoing crisis in the banking sector was important for India to support investment and inclusive growth agenda. Steel stocks will remain in focus on report that the government has set aside Rs 200 crore for an innovation fund to increase domestic steel production. The government has set a target to increase steel capacity to 300 mt by 2030 from the current levels of 160-170 mt per year. Sugar stocks will remain in limelight on report that sugar prices at the wholesale markets in Mumbai has crossed Rs 29 a kg after Wednesday’s decision by the Union government to fix this as the legal minimum sale price (MSP) for mills.

The US markets ended mostly lower on Thursday due to profit taking after the tech-heavy index rose to new record highs in recent sessions. All the Asian markets are trading in red in early deals on Friday, as investors sentiment turned slightly cautious after recent gains seen earlier in the week.

Back home, extending their previous session’s rally, Indian equity benchmarks ended the Thursday’s trade with a gain of around a percent with Sensex and Nifty recapturing their crucial 35,400 and 10,750 levels respectively. Sentiments remained buoyant throughout the session, despite some profit booking in last leg of trade. Sentiments remained up-beat since beginning with World Bank’s statement that India will retain the tag as the world’s fastest growing major emerging economy for the next three years. The bank’s June 2018 edition of the Global Economic Prospect report pegged India’s GDP growth at 7.3% in FY 2018-19 and 7.5% in FY 2019-20, reflecting robust private consumption and strengthening investment. Traders also took some encouragement with Moody’s Investors Service in its latest report expecting India to stick to the estimated fiscal deficit of 3.3% of GDP and even cut capital expenditure to offset any slippage from the budgeted target. Some support also came with finance ministry stating that it feels that most impact of the repo rate hike by the Reserve Bank of India (RBI) has already been discounted by banks and also sees the changes in non-performing assets (NPA) norms for Ministry of Micro, Small and Medium Enterprises (MSMEs) as a huge positive. The RBI gave MSMEs a temporary breather, allowing them to delay their loan repayments by 180 days without being classified as non-performing. Adding to the optimism, RBI Governor Urjit Patel said that there are no implications on non-performing assets (NPAs) of banks because of farm loan waivers provided by various states. However, market participants booked small amount of their profit in last leg of trade on report that foreign direct investment (FDI) to India declined to $40 billion in 2017 from $44 billion in the previous year. FDI inflows to South Asia contracted by 4% to $52 billion, owing to a drop in inflows to India. Some concern also came on report that the RBI’s decision to increase the key lending rate by 25 basis points will hurt India’s growth prospects and hit business sentiment. Finally, the BSE Sensex surged 284.20 points or 0.81% to 35,463.08, while the CNX Nifty was up by 83.70 points or 0.78% to 10,768.35.