Benchmarks likely to make cautious start; Services PMI eyed

Indian markets extended their losses for second straight session and ended lower on Thursday amid weak global cues coupled with sustained weakness in the domestic currency. Today, the markets are likely to make cautious start mirroring the nervousness in global markets amid growth slowdown concerns and rising oil prices. Trade will be muted ahead of corporate earnings scheduled to begin next week. Besides, investors will be eyeing Services PMI data for the month of December to be out later in the day. There will be some cautiousness with a private report that despite crossing the Rs 1-trillion mark twice this year, the goods and services tax (GST) collections are running well behind the budgeted target. As opposed to a monthly target of Rs 1.04 trillion, the monthly run rate adjusting for refunds, works out to around Rs 89,600 crore. This could force the government to either cut its capital expenditure this year or roll over spending on account of subsidies to next year in order to meet the fiscal deficit target. However, some support may come later in the day with Finance Minister Arun Jaitley’s statement that enacting the Insolvency and Bankruptcy Code (IBC) has helped lenders get Rs 80,000 crore in 66 cases and another about Rs 70,000 crore is likely to be recovered in the remaining months of the current financial year.  Traders may take note of the Department of Industrial Policy and Promotion’s (DIPP) clarification that the Foreign Direct Investment (FDI) rules for e-commerce have not allowed foreign investment in the inventory-based model or multi-brand retailing. It also stressed that the provisions are also not against the interest of consumers, noting that only fair, competitive and transparent business practices would be beneficial for buyers. Meanwhile, the Finance Ministry has allowed businesses to claim input tax credit benefit for the first financial year of GST roll out, till March 2019, provided it matches with the return filed by their suppliers. The deadline for claiming input tax credit (ITC) ended on October 25, 2018. There will be some buzz in the banking sector stocks with India’s Finance Minister Arun Jaitlet’s statement that commercial banks were likely to recover Rs 70,000 crore ($9.95 billion) of bad loans by the end of March, helped by resolution of 12 large cases. There will be some reaction in the NBFCs stocks with ratings agency ICRA’s report that the ongoing issues with the non-bank lenders will crimp the operating profits of such companies by up to 0.50%. It said the decline in profitability will be primarily due to increase in the cost of funds, slowdown in portfolio growth and cost of carrying additional liquidity due to the troubles.

The US markets end sharply lower on Thursday, as weak economic data and a rare sales warning from Apple sparked fresh worries among investors about a global slowdown. Asian markets are trading mostly in red on Friday following sharp decline on Wall Street overnight amid fears of a slowdown in the global economy.

Back home, Bears tightened grip on Dalal Street, with both the larger peers closing with losses of more than a percent. After a cautious start of Thursday’s trading session, the markets managed to keep their heads in green terrain during early deals, supported by the Finance Ministry’s statement that the Indian economy is projected to be the fastest-growing major economy in the current and upcoming fiscal 2019-20. It also emphasized that the government has taken several steps to boost investors’ confidence. It added that the average growth of the Indian economy between 2014-15 and 2017-18 was 7.3%, fastest among the major economies in the world. Some comfort also came with the Finance Ministry’s another statement that the direct tax-to-GDP ratio of 5.98% achieved during 2017-18 fiscal is the best in the last 10 years. It was 5.57% in 2016-17 and 5.47% in 2015-16.The market participants were also got some support with the government’s decision to provide 3% interest subsidy to merchant exporters, entailing an expenditure of Rs 600 crore, to enhance liquidity with a view to boosting outbound shipments. However, the key indices failed to hold their gains and traded lackluster for the most part of the session, as all sectoral indices collapsed barring Telecom and FMCG. Weak global cues also spooked the markets. Domestic sentiments remained pessimistic with a private report stating that global economic growth is expected to slow down in 2019, as tighter monetary policy, weaker earnings growth and political challenges confront the world's major economies. The report said that for the year ahead that it expected global economic growth to slow to 3.6% in 2019, after seeing a growth of 3.8% in 2018. Traders paid no heed towards Finance Minister Arun Jaitley’s statement that Rs 80,000 crore has been recovered by creditors in 66 cases resolved by NCLT and around Rs 70,000 crore more is likely to be realised by March-end. Investors also overlooked a report that the Reserve Bank of India (RBI) has set up the eight-member committee to suggest long-term solutions for the economic and financial sustainability of the micro, small and medium enterprises (MSME) sector. Finally, the BSE Sensex lost 377.81 points or 1.05% to 35,513.71, while the CNX Nifty was down by 120.25 points or 1.11% to 10,672.25.