Markets likely to make cautious start of the new week

Extending losses for second straight session, Indian markets ended sharply lower on Friday, with Sensex and Nifty settling over seven-month lows as weak global cues coupled with disappointing earnings releases dented investors sentiments. Today, the markets are likely to make cautious start of the new week amid mixed global cues. There will be some concern with the Reserve Bank of India’s (RBI) data showing that the country’s foreign exchange reserves declined by $942 million to $393.523 billion in the week to October 19 on account of a fall in foreign currency assets. In the previous week, the reserves had seen a steep fall of $5.14 billion to reach $394.465 billion. However, some support may come with Union Minister of Commerce and Industry and Civil Aviation Suresh Prabhu’s statement that country’s exports rose by 9.8% in the financial year 2017-18, which is the highest rate of growth in last six years. He added that this positive growth in exports has taken place at a time when there is a lot of negative headwinds globally. Traders may take note of the RBI’s statement that it will inject Rs 400 billion into the system in November through a purchase of government securities as it looks to meet festive season demand for funds. Meanwhile, the government expects bad loan recoveries to exceed Rs 1.80 lakh crore target for the current financial year, enthused by the impact of new insolvency and bankruptcy law. Moreover, the Prime Minister’s Economic Advisory Council (PMEAC) Chairman Bibek Debroy said the current four-slab Goods and Services Tax (GST) rate structure is likely to be reduced to three as the process of rationalising India’s new indirect tax regime proceeds further. There will be some buzz in banking sector stocks with the RBI’s data showing that Bank credit increased by 14.35% to Rs 89.93 lakh crore in the fortnight ended October 12, while the deposits rose by 8.86% to Rs 117.85 lakh crore. sugar sector stocks will be in focus as over 400 sugar producers and intermediaries are congregating on October 29, to evolve strategies to boost India’s sweetener exports in the current crushing season which began in October.

The US markets ended sharply lower on Friday on disappointing results from a handful of megacap companies amid slow down in global growth. Asian markets were trading mixed on Monday as sentiment remained fragile amid heightened worries about a slowdown in global economic growth and corporate earnings.

Back home, Indian equity benchmarks ended the last trading day of the week on lackluster note with the losses of around 1 percent each. The start of trading day was sluggish, impacted by widening Fiscal deficit data. The central government’s fiscal deficit widened in the first half (H1) of current fiscal year (2018-19). Fiscal deficit was 95.3% of the Budget Estimate (BE) in the first six months (April-September) of FY19, mainly on account of slow growth in revenue collections. The street also got cautious with a private report stating that India’s tight money conditions and fears of a contagion following a debt crisis at a local lender dented demand and put a muzzle on animal spirits in the world’s fastest-growing major economy. Adding some anxiety among the traders, the Securities and Exchange Board of India (SEBI) imposed a total penalty of Rs 70 lakh on 10 entities for indulging in manipulative trade in the shares of Shree Global Tradefin. Traders took 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% year-to-date. The indices extended the losses in the last hours of the trade to settle near their intraday low points, tracking weak European markets. Sentiment remained pessimistic, as the provisional data from the stock exchanges showed that foreign institutional investors (FIIs) sold shares worth a net Rs 1495.71 crore on October 25, 2018. Investors paid no heed towards Director General of Foreign Trade (DGFT) Alok Chaturvedi’s statement that the commerce ministry is working on a comprehensive strategy and considering incentives for exporters with a view to boost the country’s outbound shipments. He also said that the exports, which recorded about 10% growth in 2017-18 to over $300 billion, is expected to reach $330-340 billion this fiscal. The market participants even failed to take any sense of relief with Prime Minister Narendra Modi’s statement that India offers unprecedented employment and entrepreneurial opportunities. Finally, the BSE Sensex fell 340.78 points or 1.01% to 33,349.31, while the CNX Nifty was down by 94.90 points or 0.94% to 10,030.00.