Indian equity markets settled in negative territory on Thursday following weak global cues on concerns over Turkey’s financial crisis coupled with widening India’s trade deficit and weakness in rupee. Today, the markets are likely to make a flat-to-negative start as there will be some cautiousness with report that India Ratings & Research revised down its growth estimate for Indian economy to 7.2% from its earlier projection of 7.4% for 2018-19. The downward revision comes as the rating agency expects Indian economy to face headwinds from high crude oil prices, increase in minimum support prices of kharif crops, rising trade protectionism, depreciating currency. Also, there will be negative reaction on a report that investments through participatory notes into Indian capital markets plunged to over nine-year low of Rs 80,341 crore till July-end amid stringent norms put in place by the watchdog Sebi to check misuse of these instruments. Traders will also be concerned about industry chamber Assocham’s statement that Indian economy would be able to absorb the rupee depreciation in the range of Rs 69-71 range to a dollar but anything above that level would have negative impact on inflation, country’s import bill and would consequently impact the trade deficit. There will be some reaction among the banking sector stocks with the RBI’s latest data showing that bank credit grew 12.70% to Rs 86,79,741 crore in the fortnight to August 3, while in the year-ago fortnight, bank advances was at Rs 77,01,926 crore. There will be buzz in the steel sector stocks with a report that the falling rupee will adversely impact the domestic steel sector as import of various raw materials will become expensive and the cost of servicing debt would also go up.
The US markets ended higher on Thursday on renewed hope that a resolution to a trade dispute with China could be on the horizon. Investors also took some support with upbeat quarterly results and stabilizing commodities prices. Asian markets were trading in green in early trade on Friday after China and the United States agreed to hold their first trade talks since June next week and as the Turkish lira extended gains from its record low earlier this week.
Back home, selling in last hour of trade dragged benchmarks near intraday low levels, to settle below their crucial 37,700 (Sensex) and 11,400 (Nifty) marks. Markets started the session on a pessimistic note, as cautiousness crept in with report that India’s trade deficit soared to a near five-year high of $18 billion. The commerce ministry data showed that the country’s exports rose by 14.32% to $25.77 billion in July mainly on account of better performance of gems and jewellery sector as well as petroleum products, while imports during July were valued at $43.79 billion, a growth of 28.81% compared to $33.99 billion in the year ago period. Traders also remained concerned on India Ratings’ report that if the steep decline in the household savings rate -- which has fallen to 16.3% from 23.6% between fiscals 2012 and 2017 -- continues, it may pose a serious challenge to overall growth and the macroeconomic stability. However, market witnessed a decent recovery and pared all of their losses to enter into green terrain as traders took some encouragement with FICCI’s latest Economic Outlook Survey stated that the Indian economy is expected to grow at 7.4% in the current fiscal, higher than the previous year. Some support also came with Prime Minister Narendra Modi’s statement that structural reforms of four years by his government have transformed the Indian economy from being among world’s fragile five to an elephant that has started to run and made it a destination of multi-trillion dollar investment. But, recovery proved short-lived and markets once again came back in red terrain and selling in metal and basic materials dragged markets near intraday low levels. Traders remain concerned on report that India’s crude oil import bill is likely to jump by about $26 billion in 2018-19 as rupee dropping to a record low has made buying of oil from overseas costlier. Meanwhile, Union Minister Arun Jaitley said that India has comfortable foreign exchange reserves to deal with any undue volatility in the currency market and developments are being closely monitored. Finally, the BSE Sensex shed 188.44 points or 0.50% to 37,663.56, while the CNX Nifty was down by 50.05 points or 0.44% to 11,385.05.
