Markets likely to make pessimistic start ahead of RBI’s policy decision

Extending losses for second straight session, the Indian markets witnessed bloodbath on Thursday as rupee dropped to another low amid boiling crude prices and weak global cues. Today, the markets are likely to make pessimistic start ahead of the Reserve Bank of India’s (RBI) policy decision coupled with weak global cues. Street expecting that the RBI will raise rates for a third time since June on Friday to combat inflationary pressures as it grapples with a weakening rupee, surging oil prices and market instability sparked by a major non-bank finance firm’s defaults. Traders will be concerned about Union minister Nitin Gadkari’s statement that the country is facing lot of economic crisis due to crude oil imports and need to reduce imports and increase exports. There will be some cautiousness with a private report that liberalising foreign borrowings for oil companies to raise to $10 billion will not have a material impact on arresting the slide of the rupee. However, trades may get some support later in the day with the finance ministry’s statement that the government’s gross direct tax collection rose 16.7% to Rs 5.47 lakh crore in the first six months of the financial year. Meanwhile, concerned over the spike in fuel prices, the government on Thursday announced to cut excise duty on petrol and diesel by Rs 1.50 per litre. Finance Minister Arun Jaitley said that Oil Marketing Companies (OMCs) will absorb Re 1 per litre on fuel. There will be some buzz in the banking sector stocks with Crisil’s report that state-run lenders will narrow down their losses to Rs 500 billion in fiscal year 2018-19, from Rs 850 billion in the previous fiscal year, as the quantum of dud loans reduce. Also, there will be some reaction in metal sector stocks with ICRA’s report that the global prices of non-ferrous metals which have witnessed a correction due to global macroeconomic concerns in the last three months is unlikely to go down further.

The US markets ended lower on Thursday, as US Treasury yields surged to multi-year highs on robust economic data and upbeat comments from the Federal Reserve, sparking fears of accelerating inflation. Asian markets were trading in red on Friday amid region-wide concern over a strengthening greenback and higher United States Treasury yields.

Back home, Bears tightened their grip on Dalal Street with frontline gauges ending below their crucial 10,600 (Nifty) and 35,200 (Sensex) levels. Once again it turned out to be a horrendous day of trade for local bourses where key gauges settling with a cut of over two percentage points amid feeble global cues. Markets started the session on pessimistic note and never looked in recovery mood to end near intraday low levels, as traders remained on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review later this week. Traders remained cautious with Exporters’ body Federation of Indian Export Organisations’ (FIEO) statement that the growth of country’s exports is likely to slow in the coming months owing to various domestic and global factors. It said Indian exports have always been influenced by the growth in global trade and therefore, the subdued global trade forecast of 3.9% in 2018 and 3.7% in 2019 will have adverse bearing on export. Besides, the Confederation of Indian Industry (CII) has submitted a dozen suggestions to the Prime Minister’s Office, the finance minister and RBI on curbing rupee volatility and controlling the current account deficit (CAD). Markets extended southward journey after India’s services sector activity fell for the second straight month in September 2018. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index dropped to 50.9 in September from 51.5 in August, signaling the slowest growth in the current four-month sequence of rising activity. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too fell to 51.6 in September from 51.9 in August. Adding some anxiety, Nitin Gadkari said that India is facing an economic crisis due to its huge oil imports. Some concerns also came with a private report stating that new investment announcements have declined in the July-September period for the second quarter in a row. As per the report, private and public sector companies together announced new projects worth Rs 1.49 trillion in the quarter which ended in September, 41% lower than the preceding quarter. Investors failed to draw any sense of relief with Finance Ministry indicating that gross direct tax collection in the first six months of the financial year grew 16.7% to Rs 5.47 lakh crore. Finally, the BSE Sensex tumbled 806.47 points or 2.24% to 35,169.16, while the CNX Nifty was down by 259.00 points or 2.39% to 10,599.25.