Indian equity markets to make mildly negative start amid weak global cues

Snapping three-day gaining streak, Indian equity markets ended lower with losses of around one percent on Tuesday, on heavy selling by market participants, in line with a global selloff. Weakness in the markets came in a day after the outcome of a key meeting of the Reserve Bank of India (RBI) board. The measures, announced to boost lending, failed to impress investors, amid expectations that their implementation will take time. Today, the start is likely to be mildly negative on sluggish global cues. Traders may remain concern with domestic rating agency Icra in its latest report stating that after the strong upswing in April-June quarter of current financial year (FY19), GDP growth for July-September quarter is expected to dip to 7.2 percent on account of sluggishness in agriculture and industry. The GDP had grown by a higher than expected 8.2 per cent in the first quarter of FY19 as compared to the year-ago period.  There will be some cautiousness too on report that India's crude oil imports in October rose to their highest level in at least more than seven years. Crude imports in October climbed 10.5 per cent from a year earlier to 21.02 million tonnes. However, some respite can come in latter part of day on report that the committee proposed by the RBI Board for examining the Economic Capital Framework (ECF) to determine the appropriate levels of reserve the central bank ought to hold will be constituted soon. The Central Board of the RBI had decided on an expert committee to look into the ECF. Currently, the capital base of the RBI is Rs 9.69 lakh crore. Meanwhile, Job creation more than doubled to 9.73 lakh in September 2018, the highest monthly addition since September 2017, compared to 4.11 lakh in the same month last year, according to the Employees' Provident Fund Organisation (EPFO) payroll data.  The data showed that around 79.48 lakh new subscribers were added to social security schemes of the EPFO from September 2017 to September 2018. This indicates that these many jobs were created in the last 13 months. The banking sector stocks will be in action on report that the Reserve Bank of India (RBI) estimates that Indian banks will have the capacity to lend an extra 2.5 trillion rupees to 3.0 trillion rupees ($35 billion to $42 billion) over the next year after it decided to relax a deadline for lenders to boost capital ratios.  Meanwhile, A rating agency CRISIL has said that the RBI’s Board decision to extend the timeline for implementation of the last tranche of capital conservation buffer (CCB) under Basel III capital regulations could reduce the burden of public sector banks by Rs 35,000 crore this fiscal. This will provide some breathing space to capital-starved PSBs.

The US markets once again ended lower on Tuesday as US investors continued to be plagued by doubts surrounding slowing global growth, US-China trade relations, and the steady rise in interest rates that can be expected to continue into next year. The Nasdaq remains in correction territory, down more than 14% from August peak, while the S&P closed just 4 points shy of a correction, defined as a 10% decline from an index’s most recent highs. Asian markets are trading in red on Wednesday after another dive on Wall Street, where concerns have spread to the corporate-bond market.

Back home, Tuesday turned out to be a lackluster day for the Indian markets, with the Sensex and the Nifty breaching their crucial psychological levels of 35,500 and 10,700, respectively. The key equity indices made a weak opening of day, as SEBI’s data report indicated that the share of foreign portfolio investments (FPI) through participatory notes (P-notes) in domestic capital markets has declined to nine-and-a-half year low of Rs 66,587 crore at the end of October. Domestic sentiments got cautious as SEBI asked listed companies to disclose detailed reasons for delay in submission of financial results to the stock exchanges within one working day of the stipulated deadline. The trade also got affected after a survey by the UK India Business Council (UKIBC) showed that ‘Quality of bureaucracy’ is rated as the weakest component of India’s business environment for the fourth year running. Traders overlooked a report stating that Prime Minister Narendra Modi has set an ambitious deadline of December-end to implement as many business reforms as possible on the ground so that India could break into the top 50 of the World Bank Ease of Doing Business next year. In the second half of the session, the markets didn’t looked back and continued southward journey to end near their intraday low points, following weak global markets. The street remained pessimistic, on reports that India has slipped two places to rank 53rd on a global annual talent ranking released by IMD Business School Switzerland. The top slot has been retained by the Alpine nation itself. Investors took note of a report which signaled only a temporary truce, stated the Reserve Bank of India (RBI) and the government on Monday agreed to refer to an expert committee the contentious issue of appropriate size of reserves that the RBI must hold, while restructuring of stressed loans of small businesses would be considered by the central bank. Meanwhile, Commerce and Industry Minister Suresh Prabhu has said that development of industrial park rating system would help increase competitiveness of industries and promotion of the manufacturing sector. Finally, the BSE Sensex plunged 300.37 points or 0.84% to 35474.51, while the CNX Nifty was down by 107.20 points or 1.00% to 10656.20.