Markets likely to make cautious start

Indian equity markets ended the Wednesday’s trade with cut of over three fourth of a percent, as signs of escalating trade tensions between the US and other world economies dented risk appetite. Today, the start of the F&O expiry session is likely to be cautious and lots of volatility can be seen with the progress of the trade and as the traders balance their positions to the new series. There will be some cautiousness in the markets with outgoing chief economic adviser Arvind Subramanian’s statement that apart from high oil prices, the biggest headwind for India’s growth prospects was stigmatised capitalism, or the view that the private sector could not be trusted. There will be some buzz in the IT stocks, on rating agency, ICRA’s report that tightening of H-1B work visa norms by the US is likely to put cost pressures on the Indian IT services firms and impact their margins due to increase in compliances and rise in onsite hiring. Meanwhile, the Cabinet Committee on Economic Affairs has approved the capital infusion of Rs 2000 crore for strengthening of Export Credit Guarantee Corporation (ECGC). Besides, the Cabinet Committee on Economic Affairs (CCEA) has approved a mechanism for procurement of ethanol by Oil Marketing Companies (OMCs) and hiked ex-mill price for ethanol derived out of C-heavy molasses.

The US markets ended lower on Wednesday, as uncertainty over trade policy weighted down on the sentiments. Investors remained worried with mixed signals from the US and China about the future of their trading relationship, which some worry could hurt the outlook for global growth. Asian markets were trading mostly in red on Thursday, amid lingering trade concerns, following weak cues from Wall Street overnight.

Back home, Indian equity benchmarks ended Wednesday’s session near intraday lows, with Sensex and Nifty breaching their crucial 35,300 and 10,700 levels, respectively, following weak global cues. The bourses started the session slightly in green, taking support with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the Indian economy will grow at the rate of at least 7.5% in the current fiscal (FY19) and added that the growth may even go as high as 7.8%, even though as most global rating agencies have kept the country’s growth forecast between 7.3-7.4%. Traders also got comfort with Finance Secretary Hasmukh Adhia’s statement that Goods and Services Tax (GST) has entered a smooth phase within a year of its rollout, with pretty good tax compliance and the efforts will now be to simplify tax return forms. Some support came with a report stating that amidst trade and tariff tension between India and the US, but the fundamentals of the relationship are very strong and the sentiment about India among American companies are positive as it provides a huge market. However, the markets failed to hold their gains and soon slipped into red territory, as investors got cautious with the Ministry of Finance’s Quarterly Report on Debt Management showing that the government debt increased 1.7% to over Rs 76.94 lakh crore in the last quarter of financial year 2017-18 over the previous quarter. The debt was Rs 75.66 lakh crore as of December 2017. At this level, the ratio of outstanding liabilities of the central government to GDP worked-out to be 45.9% at end-March 2018. Domestic sentiments weakened further with the Reserve Bank of India (RBI) calling for greater vigilance on the domestic macro-economic front saying conditions, which pushed Gross Domestic Product (GDP) growth to 7.7% in March 2018 quarter, are changing and warned that bad loan situation might worsen.  Investors also remained concerned with rising crude prices that will trigger inflation and accelerate fiscal deficit. Finally, the BSE Sensex slipped 272.93 points or 0.77% to 35,217.11, while the CNX Nifty was down by 97.75 points or 0.91% to 10,671.40.