Indian equity markets ended Monday’s trade slightly in red, as India’s trade deficit widened to $14.62 billion in May as against $13.84 billion in May 2017, the highest in nearly four months mainly because of rising oil imports. Today, the start is likely to remain cautious, tracking weak global cues as fears of a global trade war resurfaced. There will be some cautiousness with Commerce and Industry Minister Suresh Prabhu’s statement that global trade is facing headwinds and these challenges are needed to be tackled properly to boost world economy. He also said that the US decision to impose high import duties on certain steel and aluminium products have led to a trade war kind of situation, with other countries too raising their tariff walls. Traders will also be concern about a private report that the Indian rupee would continue to witness pressure in the coming days, but it should get respite in the medium term as trade protectionism ends up hurting the US economy, a net importer of goods. Market participants however will be getting some encouragement with the Finance Ministry’s statement that it would be increasingly difficult for businesses to remain outside the tax net as Goods and Services Tax (GST) is leading to formalisation of the economy. Traders will be getting some support with the Reserve Bank of India’s data that bank credit grew 3.4% on a sequential basis in the December 2017 quarter, helped by better performance by private sector banks and an uptick in industrial credit after two successive quarters of declines. There will be buzz in sugar stocks with report that India is likely to export around 500,000 tonnes or just a quarter of the volume mandated by the government for overseas sales in 2017-18 amid higher prices at home. Lower shipments from the world’s second-biggest sugar producer could support global prices, but would increase India’s opening stocks for the next marketing season when output is expected to surge to a record.
The US markets ended mostly lower on Monday, as concerns about a global trade war after the US and China announced plans to impose tariffs on billions of dollars worth of imported goods weighted on the sentiments. Traders expressed concerns that the new tariffs announced by the US and China could negatively affect global economic growth. Asian markets were trading mostly lower on Tuesday trade after US President Donald Trump fired a fresh salvo in the ongoing trade spat between the US and China. Trump on Monday said that he had asked the US Trade Representative to identify $200 billion worth of Chinese products that will be subject to additional tariffs of 10%. He added that those tariffs will take effect if China did not change its practices.
Back home, Indian equity benchmarks ended the choppy day of trade below their crucial 35,600 (Sensex) and 10,800 (Nifty) levels, as traders remained worried on renewed concerns over a global trade war after US President Donald Trump on Friday announced plans to impose a 25% tariff on $50 billion worth of Chinese goods that contain industrially significant technologies. Markets traded in a tight band throughout the day as sentiments remained dampened with report showing that India’s trade deficit widened to $14.62 billion during the month under review as against $13.84 billion in May 2017, the highest in nearly four months mainly because of rising oil imports. Adding to the pessimism, a private FDI Report 2018 said that the number of greenfield FDI projects in India during the year fell sharply by 21% to 637. The US has surpassed India to become the top destination for greenfield FDI investment in 2017. Sentiments also weighed down with rating agency Moody’s sounding a note of caution that any reduction in excise duty on petrol and diesel would adversely affect fiscal deficit unless it is matched by a commensurate cut in expenditure. Observing that fiscal consolidation would be closely watched for assigning the sovereign rating, Moody’s said India’s biggest challenge is its fiscal strength which is relatively low as compared to -- Baa -- rated peers. However, losses remained capped with report that India’s merchandise exports grew to a six-month high of 20.18% in the month of May 2018, boosted by a rise in receipts of petroleum, engineering and pharmaceutical products. Traders also found some support with Piyush Goyal’s statement that the government is hopeful of achieving double-digit gross domestic product (GDP) growth in the country by the fourth quarter of the ongoing financial year. He also added that that government is committed to meet the fiscal deficit target of 3.3% for the current fiscal. Market participants also get some relief with a report that Reserve Bank of India eased investment norms for foreign portfolio investors (FPIs) in debt, especially into individual large corporates, a move that can help attract more overseas flows and thereby help arrest the recent fall in the rupee on one hand and also lift the recent fall in demand for corporate bonds. Finally, the BSE Sensex declined 73.88 points or 0.21% to 35,548.26, while the CNX Nifty was down by 17.85 points or 0.17% to 10,799.85.
