Indian markets extended their gains for third straight session and ended higher on Friday tracking positive global cues and on reports about government’s decision to infuse capital in seven public sector banks. Today, the markets are likely to make optimistic start of the final day of 2018, tracking firm trade in Asian peers amid easing of US-China trade tensions. Traders will be getting encouragement with the Confederation of Indian Industry’s (CII) statement that the country is expected to witness strong economic growth in 2019, after it has emerged as the fastest growing major world economy this year despite growing global vulnerabilities. It added that better demand conditions, settled GST implementation, capacity expansion from growing investments in infrastructure, continuing positive effects of reform policies and improved credit offtake especially in the services sector at 24% will sustain the robust GDP growth of 7.5% in 2019. There will be some support with the government’s statement that the net direct tax collection till December 20 this fiscal amounted to Rs 7.36 lakh crore, a growth of 14% over the same period a year ago. This is 64% of the Budget estimate for direct tax collection in the current fiscal. Traders may take note of a report that in a bid to address farmers' distress ahead of 2019 general elections, the government is considering waiving interest on crop loans for farmers who pay on time, costing an additional Rs 15,000 crore to the exchequer. However, there may be some cautiousness with the Reserve Bank of India (RBI) warning that with high bad loans and inadequate provisioning to cover the same, any relaxation in the regulatory capital requirement or risk-weights could be detrimental to banks in particular and the economy in general. There will be some buzz in the banking sector stocks with the Reserve Bank of India’s (RBI) data showing that banks have seen a significant improvement in recovery of stressed assets helped by the Insolvency and Bankruptcy Code (IBC) and amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, during FY18. In the fiscal ended March 2018, banks recovered Rs 404 billion worth of bad loans as against Rs 385 billion recovered in FY17. Also, there will be some reaction in jewellery related stocks with ICRA’s report that gold jewellery demand is likely to grow 6-7% over the medium to long-term aided by evolving lifestyle, growing disposable income and the increasing penetration of organised sector.
The US markets ended mostly lower on Friday as a still-unresolved government shutdown remains as an overhang for markets. Asian markets were trading in green on Monday as hints of progress on the Sino-US trade standoff provided a rare glimmer of optimism in what has been a rough year-end for equities globally.
Back home, key Indian equity benchmarks gathered pace to close the session on strong note, on the first day of January F&O series. The start of the Friday’s session remained jubilant, with Ministry of Commerce & Industry’s report showing that the growth of manufacturing sector as measured by the Index of Industrial Production (IIP) with base year 2011-12, has been consistently increasing over the past three years and the current year. As per data report, manufacturing sector grew at the rate of 5.6% during April-October period (Provisional), while in 2017-18, the growth rate was 4.6% as against 4.4% in 2016-17. Traders took encouragement with a private report stating that India has been getting more foreign investment than China. In 2018, India saw more than $38 billion of inbound deals compared with China’s $32 billion, buoyed by stable fundamentals. Domestic sentiments also remained firm with the new foreign direct investment (FDI) policy in the e-commerce sector may not impact jobs immediately. The new FDI policy released by the government on December 26 aims to protect the interests of local businessmen, who had accused the online marketplaces of butchering their revenue. The markets remained in the grip of the bulls throughout the session, tracking positive global cues. The trade remained positive amid reports that under attack for the agrarian crisis, the government is contemplating several incentives, including a big financial package, to woo farmers ahead of the 2019 Lok Sabha elections. The government is looking at a sort of income support scheme for farmers, along with tweaking some existing programmes, to make them more beneficial and improve their acceptability among growers. The markets participants paid no heed towards report that India’s fiscal deficit exceeded to Rs 7.17 lakh crore and touched 114.8% of the Budget Estimate (BE) of Rs 6.24 lakh crore at the end of November on account of lower revenue collections. At the end of November 2017, it was 112% of the BE. Besides, the government has budgeted to cut the fiscal deficit to 3.3% of Gross Domestic Product (GDP) in 2018-19, from 3.53% in the previous financial year. Investors even overlooked the Reserve Bank of India’s report that Indian companies borrowed $1.99 billion from overseas markets in the month of November 2018 through external commercial borrowing (ECB), 34% lower than a year ago. The borrowings though ECBs were $3.02 billion in November last year. Finally, the BSE Sensex surged by 269.44 points or 0.75% to 36,076.72, while the CNX Nifty was up by 80.10 points or 0.74% to 10,859.90.
