Markets likely to make pessimistic start

Indian markets declined on Thursday, with Nifty closing the last session of October F&O series on a negative note, while Sensex settled with cut of a percent, following overnight losses at the Wall Street coupled with fresh weakness in the rupee. Today, the markets are likely to make pessimistic start amid mixed Asian cues. Traders will be concerned with the Controller General of Accounts’ (CGA) data showing that the fiscal deficit of the Central government has widened in the first half of 2018-19 to 95.3% of the Budget Estimate (BE), mainly on account of slow growth in revenue collections. The deficit was at 91.3% of BE at September-end of the last financial year. In actual terms, the fiscal deficit or gap between the total expenditure and receipts was Rs 5.94 lakh crore during April-September this fiscal. Traders may take note of India ratings’ report that the rupee may average at 69.79 to the dollar in the second half, down 8.3% from the first half if the monetary authority props it up by mobilising at least $30 billion from NRIs as it has done in 2013. It added that the rupee is the worst-performing emerging market currency losing over 15 percent year-to-date. Besides, a private report stated that the ongoing liquidity crisis in NBFCs has rattled realty sector as this could hit fund inflows to developers as well as home buyers, and lead to slowdown in housing demand-supply. However, some support may come later in the day with Commerce Minister Suresh Prabhu’s statement that the government will soon come out with a new agri export policy which would have provisions for setting up agro specific zones to boost outbound shipments. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets recovered from a tumble in the previous session and ended higher on Thursday on strong results from major companies including Microsoft and Visa. Asian markets were trading mixed on Friday as trade tensions and geopolitical worries kept investors from tracking a rebound on Wall Street, with observers warning of further volatility to come.

Back home, October F&O expiry day turned-out to be a dismal day of trade for Indian equity benchmarks, with frontline gauges ending with a cut of one percent, breaching their crucial 33,700 (Sensex) and 10,150 (Nifty) levels. Markets started the session on pessimistic note as traders remained cautious with private report stating that Indian financial markets’ liquidity position has worsened with cash deficit widening to about Rs 1.4 lakh crore this week compared with a small surplus in first week of October. Sentiments also remain dampened with a report that the latest government data shows that during the first six months of the financial year, trade deficit in oil already touched $46.6 billion, up 67% from 27.9 billion during the same period in 2017-18. Anxiety also spread among the traders, after the Income Tax Department (ITD) launched multiple raids at over 100 locations in Tamil Nadu and Andhra Pradesh as part of a tax evasion probe against mining and mineral export companies. In second half of the trade, markets showed some recovery but it was not enough to bring markets back in green terrain. Domestic sentiments got hit with a private report stating that exchange rate movements increase the vulnerability of firms from emerging market economies, including India, which have used the proceeds of dollar bond to fund financial assets. Traders failed to take any sense of relief with Economic Affairs Secretary Subhash Chandra Garg’s statement that the non-banking financial companies’ (NBFCs) liquidity, rupee fall are temporary problems. He also noted that the government is conscious of liquidity problem but is not worried because these are temporary and would more look at taking steps to resolve these problems. Market participants shrugged off private report that corporate India’s business optimism for the October-December quarter improved marginally on expectations of higher festive season demand, implementation of the 7th Pay Commission awards and increase in minimum support price (MSP) of Kharif crops. Finally, the BSE Sensex fell 343.87 points or 1.01% to 33,690.09, while the CNX Nifty was down by 99.85 points or 0.98% to 10,124.90.