Markets likely to make cautious start of new month

Erasing all of the early gains, the Indian markets ended lower on Friday after bouts of selling emerged in most sectors. Today, the start of the new month is likely to be on cautious note amid mixed Asian markets. Investors will be eyeing manufacturing PMI data to be out later in the day. Investors also looking ahead to the Reserve Bank of India’s (RBI) outcome of the policy meeting on October 05, for further cues. Traders will be concerned with the RBI's report that India’s external debt declined 2.8% to $514.4 billion at June-end over the previous quarter on account of a decrease in commercial borrowings, short-term debt and non-resident Indian (NRI) deposits. Besides, overseas investors pulled out a massive Rs 21,000 crore ($3 billion) from the capital markets in September, making it the steepest outflow in four months, on widening current account deficit amid global trade tensions. However, some support may come later in the day with Finance Minister Arun Jaitley’s statement that the ongoing trade war may have created initial instability, but will gradually open up opportunities for India as a bigger trading and manufacturing base. Traders may take note of Assocham’s report that India’s exports hold a promising outlook with the US economy growing at its best in four years, coupled with the rupee depreciation leading to enhanced net revenue realizations. Besides, the IMF, World Bank and WTO in a joint report said that India’s economic reforms and growth story offer compelling evidence that openness in services contributes to long run growth performance. There will be some buzz in telecom sector stocks with Fitch’s latest report that the new telecom policy will help companies in serving growing data needs, cut costs and reduce red tape. It added private telecom companies’ growth will be supported as the NDCP focuses to expand broadband coverage funded by the universal service obligation fund and in partnership with private telcos.

The US markets ended mostly higher on Friday but the gains were limited after economic data painted a mixed picture of the economy. Investors shrugged off trade worries, focusing instead of strong economic data and corporate earnings. Asian markets were trading mixed in early deals on Monday, amid further signs of weakness in China.

Back home, extending southward journey for third straight session, Indian equity benchmarks ended the first day of new F&O expiry on pessimistic note, as traders remained on sidelines ahead of 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. After making a cautious start, key indices gained traction and trade in fine fettle in noon deals as traders took some relief 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. Traders also took some comfort 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. Besides, a private report state that Indian agriculture could be heading for bumper kharif crop harvest, that it could provide a major fillip to rice exports. However, markets took U-turn and entered into red terrain in last leg of trade as sentiments turned pessimistic with SBI Ecowrap report stating that the Reserve Bank of India (RBI) is expected to hike its key lending rate by 25 basis points in October. According to the report, the expected rate hike might not be the last one in the current financial year. Adding some concerns, the World Trade Organization (WTO) said that escalating trade tensions and tighter credit market conditions in important markets would moderate the growth of global merchandise trade to 3.7% in 2019 from 3.9% in 2018. The multilateral trade body also said that trade volume growth should slow to 3.7% in 2019 as global GDP growth dips to 2.9%. Markets pared most of their losses in dying hour of trade, but it was not enough to bring key gauges back into green terrain. Finally, the BSE Sensex declined 97.03 points or 0.27% to 36,227.14, while the CNX Nifty was down by 47.10 points or 0.43% to 10,930.45.