Markets to make cautious start of penultimate session of F&O expiry

Extending southward journey for the fourth straight session, Indian markets settled in red territory on Tuesday following weakness in global markets on growth concerns, while higher crude prices and weaker rupee continue to weigh on the sentiments. Today, the markets are likely to make cautious start of penultimate session of F&O expiry amid weak global cues. There will be some cautiousness with a private report that liquidity crunch may hurt economic growth. the report penciling in a few basis points shave off in economic growth in the December quarter if the hoarding of cash by banks and mutual funds continue threatening on-lending non-banking finance companies, the lifeline of lakh of medium and small enterprises. Traders may react to another private report that Private Equity (PE) investments moderated to $14.60 billion during January-September period, owing to macroeconomic concerns, market volatility and valuations of companies. Meanwhile, emerging markets guru Mark Mobius urged the Indian government to accelerate reforms and ease rules for exports to take advantage of the ongoing trade war globally. He said India has a potential to attract overseas investment and it can take advantage of the weak rupee and trade war to grab a bigger share of the exports market. There are enormous opportunities. There will be some buzz in the non-banking financial companies (NBFCs) stocks with report that the Reserve Bank of India (RBI) has cancelled the Certificate of Registration of 31 NBFCs. NBFCs have been under pressure recently due to fears of a liquidity crisis, high valuations and asset liability mismatches. Also, there will be some reaction in pharma sector stocks with ICRA’s report that the domestic pharmaceutical industry is likely to register a moderate growth at 7-9 per cent in the period between FY18 and FY21. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets ended lower on Tuesday as steep slide came after major US companies reported gloomy results and guidance. Asian markets were trading mostly in red on Wednesday following weakness on Wall Street amid concerns about the corporate earnings outlook in an environment of tightening financial conditions.

Back home, bears continued to be in a dominant position on Tuesday, as key equity indices closed the trading session lower for fourth consecutive session. After weak start, the markets remained in negative territory for whole day, amid reports that the crude oil import bill for India is expected to increase by $37 billion to $125 billion during the current financial year (2018-19, or FY19) - a 42% spike over the 2017-18 (FY18) bill of $88 billion. Domestic sentiments also got cautious with a private report stating that India is the second-most underinsured country in the world with an insurance gap of $27 billion (approximately Rs 1.98 lakh crore). Anxiety remained among the investors with another private report stating that the government doesn’t have centralised information as yet on prosecutions launched against persons identified for suspicious cash deposits. Responding to an RTI filing by FE, the I-T department, however, said 11.8 lakh of the 23.5 lakh persons identified for suspicious post-demonetisation deposits and sent notices to by it on the e-filing portal replied to the queries raised. The street also got worried after Moody’s Investors Service in its latest report stated that the profitability of Indian banks is ‘distinctively weak’ compared to those in BRICS nations. The report explained that system wide asset quality in India is weak due to stressed public sector banks, which dominate the sector. However, market participants failed to take any sense of relief with EEPC India’s statement that the government is responding well to the rising trade tensions between the world's two largest economies, maintaining a stance that serves the cause of Indian exporters best, realising how critical exports are for the country's big macro picture. Investors also overlooked Commerce Secretary Anup Wadhwan’s statement that Indian exports will reach a record-high figure both in rupee and US dollar terms during the current financial year. Even firm tax collection data also failed to support the markets during the trading session. The net direct tax collection in India grew by 15.7% on year-on-year basis to reach Rs 4.89 lakh crore in the current fiscal till third week of October. This marks over 42% of the full-year direct tax collection target of Rs 11.5 lakh crore for the fiscal ending March 31, 2019. Finally, the BSE Sensex slipped 287.15 points or 0.84% to 33,847.23, while the CNX Nifty was down by 98.45 points or 0.96% to 10,146.80.