Markets to make cautious start ahead of macro-economic data

Indian markets ended Friday’s choppy trading session in red territory with marginal cut, led by a fall in information technology (IT) and metal stocks amid weak global cues as the US Fed hinted at a rate hike next month. Today, the markets are likely to make cautious start ahead of macro-economic data amid mixed Asian cues. Market-men will be eyeing the macro economic data of industrial production and consumer price inflation to be released after the market hours. Traders will be concerned with former RBI Governor Raghuram Rajan’s statement that demonetisation and the Goods and Services Tax (GST) are the two major headwinds that held back India’s economic growth last year, and asserted that the current 7% growth rate is not enough to meet the country’s needs. There will be some cautiousness with Federation of Indian Export Organisation (FIEO) President Ganesh Gupta’s statement that exports of over half of the 30 sectors closely monitored by the Commerce Ministry were in the negative zone in September. Overall exports in September were contracted by 2.15% to $27.95 billion mainly due to the base impact. However, he expressed hope that the export growth would be better in the coming months as the order books are healthy. Traders may take note of a report that former vice-chairman of Niti Aayog Arvind Panagariya has cautioned that the recent government move to raise import duties on a host of products in a bid to contain current account deficit (CAD) can be counter-productive and does not augur well for the economy. Meanwhile, the SEBI has shortlisted seven firms, including Wipro and L&T Infotech, to build a private data storage cloud, automate its inspection of brokers and enhance analytics capabilities, as the regulator is eyeing a technological leap in surveillance and investigation functions. There will be some buzz in auto sector stocks with the Society of Indian Automobile Manufacturers’ (SIAM) data showing that domestic passenger vehicle sales rose 1.55% to 2,84,224 units in October as against 2,79,877 units in the same month last year. also, there will be some reaction in sugar sector stocks with report that saddled with surplus stock, sugar mills in India have contracted to export about 8,00,000 tonnes of the sweetener so far to countries like Middle East and Sri Lanka.

The US markets ended sharply lower on Friday on renewed concerns about the outlook for interest rates on the heels of the Federal Reserve’s monetary policy announcement on Thursday. Asian markets were trading mixed on Monday, as investors fretted about the outlook for global growth.

Back home, Indian equity benchmarks ended the volatile day of trade marginally in red on Friday, as traders remained on sidelines ahead of the Index of Industrial Production (IIP) and Consumer Price Index (CPI) to be released next week. Markets started the session on pessimistic note, as traders remained concerned about Moody’s Investors Service’s statement that Indian economy will expand 7.4% in 2018, but the growth will slow down to 7.3% in the next year as domestic demand tapers on higher borrowing cost due to rising interest rates. It said the greatest downside risk to India's growth prospects stem from concerns about its financial sector. Market participants also remained cautious with a private report stating that unemployment rate in the country rose to 6.9% in October - the highest in two years. The estimated number of people employed during October 2018 was 397 million. This was 2.4% lower than the rate in October 2017. Meanwhile, the finance ministry said that GST refund of Rs 82,775 crore to exporters has been cleared as on October 31, which is 93.8% of the total such claims with the tax authorities. The ministry said Rs 5,400 crore worth GST refund is still pending with the government and that is being expeditiously processed. However, markets pared all of their losses and turned green in noon deals, as traders took some support from Finance Minister Arun Jaitley’s statement that demonetisation helped in tackling black money and expanding the tax base. Sentiments also remained optimistic with a report stating that demonetisation was a fundamental corrective without which the Indian economy would have collapsed by now just like subprime crisis in the US. But, markets once again turned pessimistic and entered into red terrain to end marginally in red, as market participants turned cautious with a private report stating that slowdown in Non-Banking Financial Companies (NBFC) disbursements could have a negative impact on growth. It also said if this situation persists there will be a negative impact on growth because credit availability is going to be that much reduced for the aggregate economy. Finally, the BSE Sensex lost 79.13 points or 0.22% to 35,158.55, while the CNX Nifty was down by 13.20 points or 0.12% to 10,585.20.