Benchmarks likely to make gap-up opening on Monday

Snapping two-day losing streak, Indian markets ended higher on Friday, with financials leading the surge, as global growth worries eased coupled with strength in rupee. Today, the markets are likely to make gap-up opening tacking firm trade in global markets after soothing Federal Reserve comments. Traders will be getting encouragement with Federation of Indian Chambers of Commerce and Industry’s (FICCI) president Sandip Somany’s statement that agricultural reforms, interest rate cut and credit availability to micro, small and medium enterprises will drive India’s economic growth to 7.5% in 2019-20. He added that the economy is on a good footing. There will be some support with Reserve Bank of India (RBI) data showing that the country’s foreign exchange reserves increased by $116.4 million to $393.404 billion in the week to December 28, on account of rise in foreign currency assets. In the previous week, the reserves had increased by $167.2 million to $393.287 billion. However, there may be some cautiousness with RBI warning that a sudden surge in crude prices can upset the nation’s key macro-stability parameters, as it can sharply spike the current account deficit (CAD), inflation and the fiscal numbers, whittling the benefits of higher growth. It added that the international crude prices increased by around 12 per cent between April and September 2018. Traders will also be concerned about a report that overseas investors pulled out over Rs 83,000 crore from the capital markets in 2018, after pouring in a record Rs 2 lakh crore in the preceding year, on the back of rate hikes in the US, rise in global crude prices and rupee depreciation. There may be some buzz in the banking sector stocks with RBI’s report that despite concerns, credit growth of the scheduled commercial banks (SCBs) improved across all bank groups between March and September 2018. Besides, Centre has infused more than Rs 51,000 crore in public sector banks till December 2018. There will be some reaction in sugar sector stocks with Indian Sugar Mills Association (ISMA) saying that higher production is attributed to the fact that Maharashtra and Karnataka sugar mills started crushing operations earlier this year. Though, due to substantially lower rainfall and white grub infestation, Maharashtra is likely to produce significantly lower quantities of the commodity this year as compared to the last. Overall, the country is expected to produce much less sugar this season as compared to last.

The US markets ended Friday’s trading session in green territory with notable gains on strong US jobs report and upbeat note following dovish Federal Reserve comments. All the Asian markets are trading higher on Monday as a dovish turn by the Federal Reserve and startlingly strong US jobs data soothed some of the market’s worst fears about the global outlook.

Back home, Indian equity bourses bounced back to green on the last trading day of the week, with Sensex and Nifty closing with gains of over a half percent. Key equity indices made a positive start but failed to retain gaining momentum, as India’s services sector activity fell in month of December, as growth of new work and activity moderated from November’s recent high. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index slipped to 53.2 in December from 53.7 in November. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too eased to 53.6 in December from 54.5 in November. Domestic sentiments also got affected 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. But, in noon deals, the markets bounced back to end the session in green, aided by 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. Separately, Finance Minister Arun Jaitley said that there would be no loss of jobs due to merger of public sector banks. Positive cues from the global markets also provided support to the equity indices to hold their gains. Some support came with a report that the Central Board of Indirect Taxes and Customs (CBIC) has allowed businesses to correct any error or omission in filing of final sales return or GSTR-1 for the period July 2017-March 2018. Now businesses can correct the errors in the returns to be filed for January-March 2019. The market participants took a note of a private report stating that the Reserve Bank of India will definitely shift its stance from calibrated tightening to neutral in the next policy. Finally, the BSE Sensex gained 181.39 points or 0.51% to 35,695.10, while the CNX Nifty was up by 55.10 points or 0.52% to 10,727.35.