Markets to open in green on good macroeconomic data

The Indian markets made a strong come back on Wednesday after two sessions of continues fall, amid a recovery in the rupee coupled with reports that India’s exports grew by 19.21% to $27.84 billion in August. Today, the markets are likely to make a gap-up opening following positive cues from global markets coupled with good macroeconomic data. Retail inflation of India cooled to an 11-month low of 3.69% in August mainly due to a fall in prices of kitchen items, including fruits and vegetables, while industrial production grew at 6.6% in July, slightly faster than the expected 6.5% expansion, on the back of good performance by the manufacturing sector and higher offtake of capital goods and consumer durables. There will be some support with a private report that private equity (PE) and venture capital (VC) investments stood at $1.6 billion across 50 deals in August, with buyout deals recording two times increase in value compared to the year-ago period. Traders may take note of a report that the government is determined to keep fiscal deficit within the budgeted level of 3.3% of GDP as the country cannot afford to have a twin deficit problem. Meanwhile, the government has notified October 1 as the date for implementing the tax deducted at source (TDS) and tax collected at source (TCS) provisions under GST law. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1% on payments to goods or services suppliers in excess of Rs 2.5 lakh. Also, states will levy 1% TDS under state laws. There will be some buzz in banking sector stocks with report that banks need to take a haircut of 40-60% to have a rating of RP4 for implementation of any resolution plan, with bad loans worth over Rs 50,000 crore under RBI’s independent credit evaluation (ICE) framework. There will be some reaction among the textiles sector stocks as India Ratings and Research maintained a stable outlook on the cotton and synthetic textiles sector for the remaining period of this financial year. It expects the domestic demand for textiles to remain robust from end-users, supported by a strong rise in private consumption during the rest of FY19.

The US markets ended higher on Thursday following recent reports that the US is proposing a new round of trade talks with China in the near future. Asian markets were trading in green on Friday as moves by the US and China to resolve a bitter trade dispute and a sharp interest rate hike in crisis-hit Turkey supported global risk appetite.

Back home, bulls which woke up in last leg of trade mainly helped the benchmarks to end near intraday highs on Wednesday, with frontline gauges recapturing their crucial 37,700 (Sensex) and 10,350 (Nifty) levels. Markets made a cautious start and traded choppy for most part of the day as traders remained on sidelines ahead of macroeconomic data such as Index of Industrial Production (IIP) and Consumer Price Index (CPI) to be announced after the market hours. Market participants remain concerned with private report that regulatory policies pose the biggest risks for companies over the next three years, followed by cyber security and technology disruptions. The report showed a divide on the viewpoint of risk management amongst Indian organisations. Key gauges gained momentum and changed gear in last leg of trade to end near intraday highs, as traders took encouragement with report that India’s exports grew by 19.21% to $27.84 billion in August on account of healthy performance by sectors such as petroleum. Merchandise imports too rose by 25.41% in August to $45.24 billion due to the rising crude oil prices, leaving a trade deficit of $17.4 billion. In July, trade deficit soared to a near five-year high of $18.02 billion. Some support also came with Moody’s Investors Service’s report that the sharp depreciation in rupee’s valuation is unlikely to impact India’s sovereign credit profile as rupee-denominated government bonds and robust foreign exchange reserves mitigate the risk. Market participants also got some relief with the Finance Ministry’s statement that the decision to double the limit to Rs 20 lakh for filing applications in debt recovery tribunals will help them focus on high value matters leading to quicker recovery of bad loans. Some optimism also came with report that India’s GDP growth is likely to have peaked in the first quarter of this fiscal and going ahead some moderation is expected as weaker rupee and rising oil prices remain two major headwinds for the economy. Some optimism also came with the department of financial services (DFS) expecting good recovery of bad loans by the public sector banks (PSBs) in the second quarter of the current financial year. Finally, the BSE Sensex surged 304.83 points or 0.81% to 37,717.96, while the CNX Nifty was up by 82.40 points or 0.73% to 11,369.90.