Markets to make positive start on firm global cues

Late hour selloff mainly dragged the Indian markets lower for the second straight session on Tuesday following weak trade in global counterparts amid worsened trade tensions between the US and China coupled with surge in crude prices. Today, the markets are likely to make a positive start following firm trade in other global markets. Traders will be getting some encouragement with report that the finance ministry on September 18 asked ministries to shortlist commodities and goods for import curbs by increasing customs duty, to ease the pressure on the rupee and keep the widening Current Account Deficit (CAD) on check. Besides, Finance Minister Arun Jaitley made a case for blending subsidy with investment to augment farm sector growth and make it sustainable and self-sufficient. However, traders will be concerned about India Ratings’ report that though the Centre may manage to achieve the debt-to-GDP ratio target of 40% by FY23, the states achieving the 20% target looks difficult as most of them have not budgeted so far. There will be some cautiousness with report that the country’s rainfall deficit in the ongoing monsoon season widened to 10%, hovering on borderline drought conditions, following below-normal showers every month - a pattern of consistent shortfall not seen since 2004. There will be some buzz in sugar sector stocks with report that the government is now expected to come out with a bailout package for sugar sector, after announcing a higher price for ethanol manufacturers.

The US markets ended higher on Tuesday, as investors shrugged off concerns about the escalating trade war between the US-China and shifted focus on the robust economy. Asian markets were trading mostly in green on Wednesday as investors looked past the latest escalation in the US-China trade conflict, seen by some market participants as less severe than expected.

Back home, Tuesday turned-out to be a disappointing day of trade for Indian equity benchmarks with frontline gauges ending near intraday low levels, breaching their crucial 37,300 (Sensex) and 11,300 (Nifty) mark. Markets started the session with cautious tone as traders remain 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, market participants remained cautious with International Monetary Fund’s (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, losses remain capped as some relief came with CBDT Chairman Sushil Chandra expressing confidence in exceeding Rs 11.5 lakh crore direct tax collection target in current fiscal. Some support also came with report stating that Markets regulator SEBI has relaxed initial public offer (IPO) norms to allow companies to announce the price band two days before an offering. But selling in last leg of trade mainly played spoil sports for domestic markets and dragged key gauges near intraday lows as sentiments got hit with credit rating agency, India Ratings and Research’s latest report that banks' credit costs are likely to remain elevated at 2%-3% during FY19-FY20, on the back of ageing of non-performing assets (NPAs), accelerated provisioning and slippages especially from non-corporate accounts. Traders took note of a report that with interest rates cycle reversing, cost of borrowing for housing finance companies (HFCs) and microfinance institutions (MFIs) is likely to increase by over 30 basis points in the current fiscal year, and by another 40-50 basis in FY20. Separately, the indebtedness of Indian households nearly doubled in the year to March 2018, with their financial liabilities rising 80% to Rs 6.74 lakh crore. Traders overlooked Finance minister Arun Jaitley’s statement that the reforms undertaken by the government in the banking sector have started to yield results and recoveries increased on bad loans that had ballooned because of disproportionate lending during the Congress-led UPA rule. Finally, the BSE Sensex declined 294.84 points or 0.78% to 37,290.67, while the CNX Nifty was down by 98.85 points or 0.87% to 11,278.90.