Markets likely to make positive start on firm global cues

Extending losses for third straight session, the Indian markets ended a volatile trading day in the red territory on Wednesday due to higher crude oil prices. Besides, heavy losses in finance stocks added pressure on the markets. Today, the markets are likely to make gap-up opening tacking firm global cues. Traders will be getting some encouragement with Prime Minister Narendra Modi’s statement that the size of Indian economy would double to $5 trillion by 2022, with manufacturing and agriculture contributing $1 trillion each. Also, there will be some support with report that India is hopeful of resolving the issue of tariffs on steel and aluminium with the US soon and both sides are engaged in finalising a trade package. Traders will be getting some support with report that the Reserve Bank eased norms for companies in the manufacturing sector to raise overseas funds and allowed Indian banks to market Masala Bonds in line with the government’s measures to prop up the rupee. However, there may be some cautiousness with EEPC India’s statement that raising the import duty on steel or steel products will widen the current account deficit and severely hit engineering exports from the country. Meanwhile, the federation of chambers of commerce and industry (FICCI) has called for a joint meeting between the industries and the government to chalk out a strategy balancing expenditure, and boosting economic growth. There will be some buzz in select banking sector stocks with rating agency Moody’s statement that the proposed merger of Bank of Baroda, Vijaya Bank and Dena Bank is credit positive because the merger would provide scale efficiencies and help improve the quality of corporate governance. There will be some reaction in infrastructure sector related stock as India Ratings and Research (Ind-Ra) Thursday maintained a stable outlook across the infrastructure sector with the exception of coal-based thermal power, which continues with its negative outlook for the remaining part of FY19.

The US markets jumped higher on Thursday as traders took some support with a report from the Labor Department showing initial jobless claims unexpectedly dipped to their lowest level in nearly fifty years in the week ended September 15. Asian markets were trading mostly in green on Friday as investors viewed Beijing’s and Washington’s fresh exchange of import tariffs as less harmful than initially feared.

Back home, Indian equity benchmarks extended their southward journey for third straight session with frontline gauges ending below their crucial 11,250 (Nifty) and 37,200 (Sensex) levels. Markets started the session on an optimistic note 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. Some support came with a report stating that Indian farmers and US manufacturers of medical devices could be among the main winners in a trade package under negotiation, as the US and India look to remove long-standing irritants to ties. Traders took note of a private report that India has deferred its plan for a second time to impose retaliatory tariff worth close to $235 million on 29 American products by 45 days to November 2. However, markets took U-turn and entered into red terrain in last leg of trade with 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. Markets extended losses to end near intraday lows with report that SEBI has changed the fee structure for the Rs 25-trillion mutual fund (MF) industry, a decision that will hit the profits of asset management companies (AMCs) but result in savings for investors. Adding to the pessimism, a private report added 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. Sentiments also got hit with another report that there has been a steep decline in economic confidence in India over the past year. In 2017, 83% of individuals surveyed thought the economy was doing good. But in 2018, it was down to 56%. This decline is in contrast to the trend in most countries where public confidence was similarly pronounced in 2017 and 2018. Finally, the BSE Sensex declined 169.45 points or 0.45% to 37,121.22, while the CNX Nifty was down by 44.55 points or 0.39% to 11,234.35.