Markets to make positive start on firm global cues

Extending losses for second straight day, the Indian markets ended Thursday’s futures and options (F&O) expiry session on weak note after the US Fed hiked interest rates and struck a hawkish stance amid rising crude oil prices. Today, the markets are likely to make optimistic start on firm global cues. Investors will be eyeing the Goods and Services Tax (GST) Council’s 30th meeting to be held on Friday to discuss multiple proposals for levying additional cess to help flood-ravaged Kerala recoup revenue losses. Traders will be getting some encouragement with CRISIL Research’s report that revenues of corporates are expected to log a robust 12.1% year-on-year growth in the second quarter of FY 2019, nearly twice the 6.4% growth in the corresponding quarter of last fiscal. There will be some support with a report that the Commerce Ministry removed the value limit for exports through post but has fixed Rs 5 lakh cap in case of overseas shipments through courier services. Exporters’ body FIEO said the move gives an edge to shipments through foreign post offices over couriers. Meanwhile, The Reserve Bank of India allowed banks to dip further into statutory liquidity reserves in a bid to ease a liquidity squeeze in the money markets. RBI in a statement said banks could carve out up to 15% of holdings under the statutory liquidity reserves to meet their liquidity coverage ratio (LCR) requirements as compared to 13% now. There will be some buzz in airlines industry with report that Indian carriers are unlikely to face a significant hit from the government’s decision this week to impose a tariff on jet fuel, as imports account for less than 5% of domestic jet fuel consumption. Also, there will be some reaction in food processing sector stocks with report that the government will relax foreign direct investment (FDI) regulations to give a boost to the food processing sector, which has attracted $8.7 billion of investment.

The US markets ended higher on Thursday as investors digested the Federal Reserve’s decision to raise interest rates and looked ahead to third-quarter earnings season next month. Asian markets were trading mostly in green on Friday, following gains on Wall Street overnight after news of robust US economic growth, with the chairman of the Federal Reserve saying the US does not face a large chance of near-term recession.

Back home, Indian equity markets truly depicted the choppiness of F&O expiry session on Thursday with key gauges ending the session with a cut of over half a percent. Markets extended previous session journey and ended in red terrain for seventh times in last eight sessions, breaching their crucial 11,000 (Nifty) and 36,400 (Sensex) levels. Markets started the session on a positive note with traders getting some comfort from the United Nations Conference on Trade and Development (UNCTAD) expectation that India’s economy to grow 7% in calendar year 2018 compared with 6.2% in 2017. The body said that an expansion in services and higher demand for exports has led to a moderate recovery in industrial production. Some support also came with Finance Minister Arun Jaitley’s statement that India has large avenues of growth to sustain a GDP increase of 7-8 per cent for two decades, unlike any other major economy. However, markets lost momentum and pared all their gains to enter into red terrain as traders turned cautious with a United Nations trade report stating that the world economy remains on a shaky ground a decade after the 2008 financial crisis as the global economic growth is spasmodic and many economies are operating below potential. Domestic sentiments continued to hit with a private report stating that the Reserve Bank of India (RBI) is likely to raise interest rates in early October, despite relatively tame inflation, to prop up a retreating rupee. Some concerns also came after Moody’s investor service expecting US sanctions on Iran to be credit negative for Indian refiners with the estimated total decline in earnings for the Indian refiners to be about $400-$500 million. The move is also expected to increase refiners’ exposure to oil price volatility. Traders overlooked Federation of Indian Export Organisations (FIEO) President G K Gupta’s statement that higher tariffs coupled with the depreciating rupee will provide double protection to domestic industry and enable it to compete with imports. Besides, he added that it will give a push to Indian manufacturing as well. Finally, the BSE Sensex declined 218.10 points or 0.60% to 36,324.17, while the CNX Nifty was down by 76.25 points or 0.69% to 10,977.55.