Markets to make cautious start; macro-economic data eyed

Indian markets recouped early losses and ended higher on Tuesday mainly on the back of strong buying across consumer durable pharma, banking and information technology stocks. Also, investors awaited the final outcome of the state assembly elections results. Today, the markets are likely to make a cautious start ahead of macro-economic data amid mixed global cues. Market-men will be eyeing the macro economic data of industrial production and consumer price inflation to be released after the market hours. There will be some cautiousness with the Reserve Bank of India’s (RBI) data showing that the Central Bank continued to remain a net seller of the US dollar in October, as it sold $7.204 billion of the greenback in the spot market. In the reporting month, the central bank purchased $945 million, while sold $8.149 billion in the spot market. RBI maintains that its intervention in the foreign exchange market is to curb volatility in the rupee and not to target a level of the domestic currency. However, traders may take some support with Industry body CII’s statement that the appointment of former bureaucrat Shaktikanta Das as the new Reserve Bank of India (RBI) Governor comes as a huge sentiment booster to the industry and expressed confidence that he will take urgent steps to address the liquidity squeeze in economy. Das was appointed as the new governor of the RBI, a day after his predecessor Urjit Patel’s resignation. Moreover, CII also said that the government should consider permitting 100% foreign direct investment (FDI) in multi-brand retail trade and further improve ease of doing business for the sector to promote growth in the segment. Meanwhile, the Agriculture Ministry launched online portal Ensure to connect with direct benefit transfer and provide simple, useful and transparent system to the beneficiary. There will be some reaction in stocks related to renewable energy (RE) sector with rating agency ICRA expecting a capacity addition of 10,000 MW in fiscal year 2020, and has maintained a stable outlook for the sector. The share of renewable energy in the generation mix has increased from 5.6% in FY2015 to 7.8% in FY2018. Also, there will be some buzz in construction sector stocks with CARE Ratings’ report that the pace of the construction sector is set to face a decline in FY20 on funding shortage for new projects.

The US markets ended Tuesday’s volatile session mostly in red as investors weighed mounting political tension in the nation’s capital. Asian markets were trading mostly in green on Wednesday following positive signs on the outlook for US-China trade talks.

Back home, Indian equity markets heaved a sigh of relief on Tuesday, after both the larger peers, Sensex and Nifty, staged recovery to end the trading session in green terrain. The markets made a worst start of the day, as sentiments got hit with the Reserve Bank of India (RBI) governor Urjit Patel’s unexpected resignation from his post on Monday. The government and the RBI have been fighting for weeks over how much autonomy the RBI should have as the administration of Prime Minister Narendra Modi seeks to reduce curbs on lending and to gain access to the RBI’s surplus reserves. Adding more worries among the traders, Moody’s Investors Service’s said that the independence of a country’s central bank is an important consideration while assessing a country’s institutional strength and any attempt by the government to curtail it would be credit negative. To a query on the sovereign rating impact of the developments around RBI, Moody’s said while the motivation for the RBI Governor’s resignation is unclear, the independence of a country’s central bank is an important consideration in their assessment of a sovereign’s institutional strength. However, in the second half of the session, the key indices erased all of their losses to settle the day on positive note, tracking firm European markets. The street took support with Commerce and Industry Minister Suresh Prabhu’s statement that the New Industrial Policy, which will replace the 27-year-old existing policy, has been sent for the Union Cabinet’s consideration. The new industrial policy aims to resolve bottlenecks arising from inadequate infrastructure, restrictive labour laws and complicated business environment. Some relief came after the government made the entire 60% of the corpus withdrawn at the time of retirement tax free. Investors took note of Former chief economic adviser Arvind Subramanian’s statement that the inclusion of petrol and diesel in the Goods and Services Tax (GST) ambit is not possible until the revenues under the new tax regime stabilize. Meanwhile, assembly poll results showed BJP losing power in Rajasthan and Chhattisgarh, while having a close finish in Madhya Pradesh. Finally, the BSE Sensex surged 190.29 points or 0.54% to 35,150.01, while the CNX Nifty was up by 60.70 points or 0.58% to 10,549.15.