Markets likely to make pessimistic start on feeble global cues

Indian equity markets ended lower on Tuesday, as traders eyed looming trade wars after US President Donald Trump threatened new tariffs on $200 billion of Chinese goods and Beijing vowed to immediately retaliate. Today, the start is likely to be on negative side, mirroring weak global cues as an escalating trade spat between the world’s two biggest economies sparked concerns over the future of global trade. However, traders may get some support with Economic Affairs Secretary Subhash Chandra Garg’s statement that it is a plausible aspiration for India to become a $10 trillion economy by 2030. He also said that current account deficit (CAD) at 2.5% of GDP won't be a worry as the government has the required instruments to deal with any imbalance created due to foreign fund outflow. Traders will also be reacting to global rating agency, Moody’s latest report that non-financial corporates in the country may show modest improvement in their leverage levels in the current financial year, supported by higher revenue and earnings growth. There will be some buzz in the aviation related stocks with the Directorate General of Civil Aviation’s (DGCA) data indicating that domestic air passenger traffic grew 16.53% to 11.86 million in May this year over the same period a year ago. It added that 12 domestic airlines together flew 11.85 million passengers as compared to 10.17 million passengers in May 2017. State-run banks stocks will remain in focus on meeting the credit demands of 4,500 good borrowers besides micro, small and medium enterprises (MSMEs) as the government looks to these lenders to help revive growth.

The US markets ended sharply lower on Tuesday on fears that the United States and China may be veering toward an all-out trade war. Asian markets were trading mixed on Wednesday as traders anticipated the next development in US-China trade tensions after a ratcheting up of rhetoric sparked a global sell-off on Tuesday.

Back home, Indian equity benchmarks ended Tuesday’s session on pessimistic note, following weakness in the global peers on US-China trade tensions. After a negative opening, the markets traded lackluster throughout the session as domestic sentiments remained cautious 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. Adding some pessimism, Commerce Secretary Rita Teaotia said that exporters, particularly from the food and agriculture sectors, should strictly comply with global norms for quality and standards, or else they might lose their export market share to other countries. Separately, former chairman of the empowered committee on GST, Amit Mitra said that around Rs 25,000 crore refund is pending for the exporters while more than 3 lakh applications seeking refunds have piled up with the central government. He also said that the exporters are suffering hugely for this. Further, in the last leg of the trade, the key indices extended their losses to end near their intraday low points, as sentiments weakened further amid India Ratings’ report that the adverse conditions in the interest rate market, increasing risk aversion by state-run banks, volatile external environment and limited access to alternative financing options as critical drivers for corporate credit quality in FY19, especially for weak entities. Traders failed to take any sense of relief with Union Minister Arun Jaitley’s statement that Indian economy may maintain the tag of fastest growing major economy for some years. The markets participants even overlooked Interim Finance Minister 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 stated that there is a demand uptick in the economy and India is a market place of billions of aspirational consumers. Meanwhile, Finance Ministry said that the Goods and Service Tax (GST) has resulted in formalization of economy and consequently information flow would eventually augment not only the Indirect Tax collections but also Direct Tax collections. Finally, the BSE Sensex declined 261.52 points or 0.74% to 35,286.74, while the CNX Nifty was down by 89.40 points or 0.83% to 10,710.45.