Markets likely to make positive start of the new month

Indian markets pared most of their early gains and ended marginally higher on Friday as investors awaited Q2 GDP data and the outcome of the G20 summit over the weekend for directional cues. Today, the markets are likely to make positive start of the new month, following firm global cues bolstered by the report that US President Donald Trump and his Chinese counterpart Xi Jinping have agreed to a 90-day truce in the escalating trade war between the two countries. This is the relief for the global growth outlook and a positive for emerging markets. Traders will be getting some encouragement with a report that overseas investors have pumped Rs 12,260 crore into the Indian capital markets in November, making it the highest inflow in 10 months due to falling crude oil prices and sharp rupee appreciation. Investors will be eyeing manufacturing PMI data to be out later in the day. However, traders may be concerned about the Central Statistics Office’s (CSO) latest report showing that India’s gross domestic product (GDP) grew 7.1% in July-September, down from 8.2% in the previous quarter, as consumption demand moderated and farm sector displayed signs of weakness. The government attributed the slowdown in India’s GDP growth rate to a higher base effect, higher import bill on account of oil prices and weakening of the rupee. Also, there may be negative reaction on the government data showing that India reported a fiscal deficit of Rs 6.48 lakh crore during April-October, which translates to 103.9% of its full-year target. There may be some cautiousness with report that growth of eight infrastructure sectors slowed down to 4.8% in October 2018, as compared to 5% in October 2017.  Besides, the Goods and Services (GST) collection in November dropped to Rs 97,637 crore, lower than Rs 1 lakh crore collected previous month. There will be some buzz in the food processing sector stocks with Union Cabinet minister for Food Processing Harsimrat Kaur Badal’s statement that the government has planned to set up a non-banking financial company (NBFC) with an initial corpus of Rs 2,000 crore to fund food processing industries as part of its effort to boost this sector and double farmers income. There will be some reaction in steel sector stocks with a report that India’s finished steel exports fell by 23.4% to 0.596 million tonnes (MT) in October 2018. The auto sector stocks will also be in action, reacting to their monthly sales numbers.

The US markets ended higher on Friday ahead of a highly anticipated meeting between President Donald Trump and Chinese President Xi Jinping. Asian markets rallied in early deals on Monday after US and Chinese leaders brokered a truce in their trade conflict, a relief for the global economic outlook and a tonic for emerging markets.

Back home, Indian equity benchmarks ended flat on Friday ahead of key economic growth (GDP) data to be release later in the day. The markets made an optimistic start, aided by economic policy think-tank the National Council of Applied Economic Research’s (NCAER) report stating that Indian economy is projected to grow at 7-7.4 per cent in the current fiscal. It added that the real agriculture Gross Value Added (GVA) is envisaged to grow at 3 per cent and real industry GVA at 7 per cent in 2018-19. As per the report, the forecast for Gross Value Added (GVA) at basic prices is 7.0-7.4 per cent. These forecasts at constant (2011-12) prices are based on NCAER's annual GDP macro model. Sentiments were also upbeat during first half of the session, with a private report that Prime Minister Narendra Modi has plans to unveil a long-awaited industrial policy soon to boost domestic manufacturing and accelerate economic growth before federal polls next year. However, the key indices turned volatile during the second half of the session, amid private report stating that India’s Gross Domestic Product (GDP) growth is expected to slow down to 7.4% in the July-September quarter of the current financial year, down by 0.8 percentage points from the previous quarter. Weak opening in European markets also dented the domestic sentiments. But, at the end of the day, the markets managed to keep their heads above neutral lines, as some relief spread among the market participants with Chairman of the Economic Advisory Council to Prime Minister (EAC-PM) Bibek Debroy’s statement that the government is looking to reform tax structures such that there is no deviation from fiscal consolidation. Some support also came with a survey report that India's small and medium businesses are using their advantages such as size, agility and innovation as their top three strategies for driving revenue growth in 2018. Finally, the BSE Sensex rose 23.89 points or 0.07% to 36,194.30, while the CNX Nifty was up by 18.05 points or 0.17% to 10,876.75.