Markets likely to open in green on Tuesday

Indian markets ended lower on first trading day of the week following negative Asian cues coupled with profit booking and weak rupee. Today, the markets are likely to make positive start amid mixed global cues as sentiment was tempered ahead of the US midterm elections. There will be some support with a private report that the government has generated higher-than-expected revenues from customs duties, which may help it rein in the fiscal deficit within its FY19 target of 3.3% of gross domestic product (GDP). Also, traders will be getting some encouragement with rating agency Crisil’s report that the rupee may appreciate to 71 against the dollar by March 2019 on positives like the dip in crude prices and the $75-billion currency swap with Bank of Japan.  However, there may be some cautiousness with report that excessive competition at times can result in stress in a particular sector, Finance Minister Arun Jaitley said pointing out that these are challenges of the growing economy. He also said that with the growing economy, the role of each regulator will expand. Traders may take note of S&P Global Ratings’ statement that most of its rated Indian companies and banks can withstand the recent sharp depreciation in the rupee, but a deep and sustained decline could squeeze their margins. It said most emerging market issuers are buffered against further currency depreciation and do not face immediate downgrade risk from currency depreciation. There will be some buzz in power sector stocks with report that average spot power price at Indian Energy Exchange (IEX) rose 45.5% in October at Rs 5.94 per unit over Rs 4.08 per unit in the year-ago month. IEX witnessed highest ever sales volume of 7,125 million units (MU) during the month due to higher demand, coal shortage, lower wind and hydro power generation. There will be lots of earnings announcements too, to keep the markets in action.

The US markets ended mixed on Monday ahead of highly anticipated midterm elections but oil prices lifted energy stocks and defensive sectors. Asian markets were trading mixed on Tuesday with markets seemingly in a holding pattern after a muted US session ahead of midterm elections.

Back home, the Indian equity indices failed to sparkle on first day of Diwali week, with both the Sensex and the Nifty ending Monday’s trading session with notable losses. The start of the day was cautious, affected by a private report stating that with global crude prices remaining elevated, the rupee is likely to be under pressure, and may touch the 76 levels against the US currency over the next three months. Domestic sentiments also got hit with another private report showing that overseas investors pulled out a massive Rs 38,900 crore (over $5 billion) from the capital markets in October, the steepest outflow in nearly two years, on rising crude oil prices, depreciating rupee and worsening current account deficit. With this, the total outflow from the capital markets (equity and debt together) has reached over Rs 1 lakh crore so far this year. The trade remained in negative during the day, as former RBI governor and top economist Raghuram Rajan said that cross-border capital flows have been a source of financial fragility and he underscored that countries should see how best they can benefit from cross-border flows, without incurring the costs. Separately, raising concerns over recent liquidity crisis in non-banking financial companies (NBFC), the industry chamber, Associated Chambers of Commerce and Industry of India (ASSOCHAM) has stated that the Reserve Bank of India (RBI) should provide a liquidity credit line of Rs 30,000-40,000 crore to non-banking financial companies (NBFC) as a temporary relief from tight liquidity conditions. However, positive data of India’s services PMI helped the markets to trim some of their losses in the last leg of the trade. India’s services sector activity signaled a solid and stronger improvement in business conditions in the month of October, aided by accelerating new work along with easing inflationary pressures. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index rose to 52.2 in October from 50.9 in September. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too improved to 53.0 in October from 51.6 in September. Some relief also came with Prime Minister Narendra Modi’s statement that he has announced measures for Micro, Small and Medium Enterprises (MSMEs) will add strength to the sector. He also stated that bigger markets and better opportunities for the MSMEs was a ‘win-win’ situation. Soothing some worries, a private report said that the government has generated higher-than-expected revenues from customs duties, which may help it rein in the fiscal deficit within its FY19 target of 3.3 percent of gross domestic product. Traders took note of eminent economist Arvind Panagariya’s statement that India and several other Asian countries have in the past defied the belief that protectionism is good for developing economies as these nations reaped benefits of opening up trade and lower tariffs. Finally, the BSE Sensex lost 60.73 points or 0.17% to 34950.92, while the CNX Nifty was down by 29.00 points or 0.27% to 10524.00.