Benchmarks likely to make positive start

Indian equity markets extended their losses for third straight session on Thursday, amid weakness in other Asian markets coupled with depreciation in rupee. Investors also remained cautious ahead of the outcome of key assembly elections. Today, the markets are likely to make optimistic start, tracking positive trend in Asian peers after the speculation that the Federal Reserve might be one-and-done with US rate hikes. Also, traders will be looking ahead of five states elections exit poll due on December 07 evening and result on December 11. Traders will be getting some encouragement with the Union Cabinet approving an agriculture export policy with an aim to double the shipments to $60 billion by 2022. The policy would focus on all aspects of agricultural exports including modernising infrastructure, standardisation of products, streamlining regulations, curtailing knee-jerk decisions, and focusing on research and development activities. Traders also will be getting some support with the Reserve Bank of India’s (RBI) deputy governor Viral Acharya’s statement that the RBI will continue to inject liquidity into the banking system through open market operation (OMO) purchases till the end of this fiscal. In the current financial year, the central bank has conducted OMO purchases to the tune of Rs 1.36 trillion, with over Rs 1 trillion of the infusion in the last three months. Meanwhile, a private report indicated that the investment of $100 billion in the Indian telecom industry as envisioned in the National Digital Communications Policy 2018 (NDCP) would result in an increase of $1.21 trillion in India’s Gross Domestic Product (GDP) on a cumulative basis. There will be some buzz in the textile sector stocks with report that India’s annual cotton output could drop 12% to the lowest in nine years as limited rainfall in the top two producing states has slashed crop yields, potentially cutting exports from the world’s top producer. Also, there will be some reaction in telecom sector stocks with Trai Secretary S K Gupta’s statement that the telecom sector will move to 5G by 2022 and access to digital platform will become highly advanced in the next five years.

The US markets ended mostly lower on Thursday on fears that the arrest of a Huawei executive would reignite trade worries. But, managed to pare early losses after a report indicating Federal Reserve is considering signaling a wait-and-see mentality after a likely interest rate hike later this month. Asian markets were trading in green in early trade on Friday as investors grappled with shifting indications on US-China trade talks and prospects for a pause in Federal Reserve tightening.

Back home, a sea of red took over Dalal Street on Thursday, as bears tighten their grip amid selloff in majority of sectors along with weak cues from global markets. Both the larger peers ended lower with the losses of more than 1.50%. After a sluggish start, the markets remained under pressure throughout the day, as Fitch Ratings revised downwards India’s GDP growth forecast to 7.2% for current fiscal citing higher financing cost and reduced credit availability. In its Global Economic Outlook, Fitch also projected that for 2019-20 and 2020-21 financial years, India’s GDP growth will be 7% and 7.1% respectively. The rating agency has also forecasted Indian rupee to weaken to 75 to a dollar by end of 2019. Adding more anxiety among the traders, Fitch Solutions said that the slow pace of land reforms will continue to result in project delays and rising costs, posing a downside risk for the road and rail sectors. Some concerns also came with a private report stating that officers of the indirect tax department have started issuing preliminary notices to captive units of multinationals and Indian companies exporting offshore support services. The street paid no heed towards Finance Minister Arun Jaitley’s statement that India, among the world's fastest growing emerging economies, is likely to maintain the high growth rate of 7-8% over the next decade. He emphasized that landmark reforms such as the Insolvency and Bankruptcy Code offer an attractive and conducive environment to foreign investors to the country. The markets participants also overlooked the finance ministry’s statement that the assessment of growth and inflation made by the Reserve bank of India’s (RBI) Monetary Policy Committee (MPC) is in line with government's reading.  Traders took note of RBI governor Urjit Patel’s statement that if the upside risks to inflation do not materialise, the bank may change its monetary policy accordingly, raising prospects of rate cuts. Meanwhile, Economic Affairs Secretary Subhash Chandra Garg said the calibrated tightening stance of RBI’s MPC probably needed a rethink even as he welcomed the decision on policy rate. Finally, the BSE Sensex plunged 572.28 points or 1.59% to 35,312.13, while the CNX Nifty was down by 181.75 points or 1.69% to 10,601.15.