Markets to make pessimistic start amid weak global cues

Snapping two-day winning streak, the Indian markets ended Monday’s session with cut of over a percent as measures outlined by the government on Friday to stem the steep decline in the rupee failed to cheer markets amid a weak trend in other Asian markets. Today, the markets are likely to make pessimistic start amid weak global cues. Traders will be concerned with report that in an escalation to the trade war with China, US President Donald Trump announced imposition of new tariffs on additional $200 billion worth of Chinese imports. On the domestic turf, there will be some cautiousness with International Monetary Fund (IMF) estimates that the real effective depreciation of Indian rupees is between 6-7% compared to December 2017. It said broadly since the beginning of the year, Indian rupee has lost about 11% of its value in nominal terms vis-a-vis the US dollar. However, traders may get some encouragement later in the day with CBDT Chairman Sushil Chandra expressing confidence in exceeding Rs 11.5 lakh crore direct tax collection target in current fiscal. There may some support with report that Markets regulator SEBI has relaxed initial public offer (IPO) norms to allow companies to announce the price band two days before an offering. Meanwhile, the government will further extend the deadline for the imposition of higher customs duties on 29 products, including almond, walnut and pulses, imported from the US. There will be some buzz in the banking sector stocks with India Ratings’ mid-year outlook showing that banks are witnessing a spurt in asset quality stress in the non-corporate segment and the overall loan loss provisions for lenders are expected to stay elevated till fiscal year 2019-20. Also, there will be some reaction in copper related sector stocks with report that India has initiated an anti-subsidy probe into increased imports of select copper wire rods from Indonesia, Malaysia, Thailand and Vietnam.

The US markets ended lower on Monday as lingering trade concerns weighted on the sentiments. Markets extended losses after President Donald Trump said an announcement on US-China trade will be coming after the close of trading. Asian markets were trading mixed in early deals on Tuesday following an escalation in trade tensions between the US and China.

Back home, Bears made strong comeback on Dalal Street on Monday after two days of halt, with frontline gauges ending below their crucial 37,600 (Sensex) and 11,400 (Nifty) levels. Markets started the session on pessimistic note and never looked in recovery mood to end near intraday low levels. Sentiments remained dampened since beginning, as traders remained concerned with report that foreign exchange reserves fell below $400 billion, for the first time since November 11, 2017, in the first week of September. As on September 7, foreign exchange reserves stood at $399.28 billion, a result of the Reserve Bank of India’s intervention at a time when portfolio flows were witnessing some reversals. Some cautiousness also crept in with ICRA’s report that funding of farm loan waivers, poll-related spending and other populist measures are likely to ensure that states are set to miss their fiscal consolidation targets budgeted at the beginning of the year. The market got hit with another private report stating that India’s world-beating stock market run is over. It has downgraded domestic stocks to the equivalent of a hold rating from buy. This is the first time it has lowered Indian stocks since 2014. Markets extended losses in last leg of trade, as market participants took a note of private report stating that ahead of the festive season, the surge in petrol rates has left consumers scrambling and cutting household expenses to adjust with the price hike. Traders shrugged off report that India’s exports rose at the fastest pace in three months to reach $27.84 billion in August on account of healthy growth in petroleum products, engineering, pharma, and gems and jewellery shipments. Besides, trade deficit during the month narrowed to $17.4 billion as against $12.72 billion in the same month last year. In July, the trade deficit soared to a near five-year high of $18.02 billion. Traders failed to take any sense of relief with Finance Minister Arun Jaitley’s statement that that the government is confident of meeting its fiscal deficit target of 3.3% of gross domestic product (GDP) in the fiscal year 2018-19. He added that the government is sure of meeting the fiscal deficit target given robust tax collections. Finally, the BSE Sensex declined by 505.13 points or 1.33% to 37,585.51, while the CNX Nifty was down by 137.45 points or 1.19% to 11,377.75.