Markets to make a cautious start amid sluggish global cues

Indian Equity markets ended in red with a cut of around two percent on Friday tracking a selloff in global markets. Domestic shares tracked broader Asian markets as the possibility of a US government shutdown and further rate hikes by the Federal Reserve next year made investors jittery. Today, the start is likely to be cautious amid sluggish global cues. Traders may remain concern on report that Finance Commission Chairman N.K. Singh has sounded a note of caution against fiscal slippage, saying it would adversely impact the country’s macroeconomic stability as well as investment climate. He expressed apprehension that some states are not according priority to fiscal discipline, which was not the case earlier. Meanwhile,  the Reserve Bank of India’s (RBI) data has showed the country’s foreign exchange reserves declined by $613.9 million to $393.12 billion in the week to December 14, due to fall in foreign currency assets. In the reporting week, foreign currency assets, a major component of the overall reserves, dropped by $631.6 million to $367.865 billion. However, traders will be getting some encouragement in later part of trade with Finance minister Arun Jaitley expressing confidence of meeting the fiscal deficit target of 3.3 % of GDP for the current financial year (FY19) despite revenue loss on account of reduction in GST rates. The GST Council in its 31st meeting has decided to cut rates on 23 commonly used goods and services. There will be also some support with Ficci’s President Sandip Somany stating that a gradual reduction in GST rates would further stabilise and strengthen the tax regime. Traders may take note of a report, in a bid to promote cleaner fuel and cut down on the huge crude oil import bills, Union Minister Nitin Gadkari has said that India endeavours to take the Rs 110 billion methanol economy to about Rs 2 trillion in five years. Sugar sector stocks may see some action on report that the government is considering an additional soft loan of Rs 7,400 crore to sugar mills for creating ethanol capacity under a recently launched scheme. There will be some buzz in the solar stocks as the GST council issued clarity on the confusion over the rates for solar power projects. It clarified that 70% of the gross value of project shall be deemed as the value of supply of said goods attracting 5% rate. Aviation stocks will keep buzzing on report that India's domestic air passenger traffic grew by 11.03 per cent to 11.64 million in November 2018. Passenger traffic during the January-November 2018 period grew by 19.21 per cent.  Also, the logistics stocks may keep buzzing on report that in a bid to cut India’s massive logistics costs, the commerce department is arming itself with a national digital tool to map logistics bottlenecks, freight movements and even toll congestions, along with a logistics portal where businesses can procure and sell services.

Extending their previous session losses, the US markets settled sharply lower on Friday as investors remained gripped by fears of a partial government shutdown, rising interest rates and flagging global growth and uncertainty surrounding US-China trade relations. Asian markets have made a weak start and are trading in red in early deals on Monday, as investors fretted that political instability in the United States was leaving the country rudderless at a time when the global economy was showing signs of faltering.

Back home, Indian equity benchmarks witnessed bloodbath on Friday with frontline gauges ending below their crucial 35,800 (Sensex) and 10,800 (Nifty) levels on global growth concern. Markets started the session on cautious note, as traders remained pessimistic with the central bank’s statement that the total external commercial borrowings (ECB) will now be rule-based and will be capped at 6.5% of the gross domestic product. The limit now works out to be about $160 billion for the current fiscal year, against the actual outstanding of $126.29 billion as on September 30. The central bank already has a rule-based exposure for foreign investors’ exposure in bonds. Foreigners are allowed to invest up to 6% of the outstanding debt. Sentiments on the street weakened further with Parliamentary Committee expressing concern over the huge losses suffered by some Central Public Sector Undertakings (CPSUs) and the low rate of return on assets and pressed the urgent need for optimum utilisation of their assets to generate better earnings. Markets extended southward journey to end near intraday lows, as traders shrugged off report that the Lok Sabha passed the Consumer Protection Bill, and the government introduced a Bill to amend the Companies Act to further improve the ease of doing business and ensure better compliance levels. The Consumer Protection Bill seeks to strengthen the rights of consumers and provide a mechanism for redressing complaints regarding defects in goods and deficiency in services. Meanwhile, International Institute of Sustainable Development (IISD) stated that India's total energy subsidies amounted to Rs 1,51,480 crore in financial year 2017, a 36 per cent decrease since FY14. India's fossil-fuel subsidies fell sharply by nearly 70 per cent, from Rs 1,73,330 crore in FY14 to Rs 52,980 crore in FY17. Finally, the BSE Sensex plunged by 689.60 points or 1.89% to 35,742.07, while the CNX Nifty was down by 197.70 points or 1.81% to 10754.00.