Benchmarks likely to make cautious start

Indian markets extended their gains for second straight session on Monday, helped led by IT, realty and select bank stocks. Sentiments also got boost on positive Asian cues and continued buying by domestic investors. Today, the markets are likely to make cautious start amid higher oil prices. Traders will be concerned with Crisil’s report that India Inc is set to report a decline in both revenue as well as profit growth numbers in the December quarter. It said revenue growth will dip by up to 5 percentage points on average to 12-13%. Traders will be reacting to report that Reserve Bank of India (RBI) governor Shaktikanta Das struck a note of caution on farm loan waivers, saying open-ended forgiveness would affect credit culture and the behaviour of borrowers. He also said the central bank is open to taking more steps to infuse liquidity if the need arises but it doesn’t want too much cash sloshing around in the banking system. Also, there will be some cautiousness with a report that the growth in direct tax collection in the first nine months of the year was marginally lower than the rate of 14.4% required to meet the budget estimate of Rs 11.5 lakh crore for direct taxes in FY19. The net (post-refunds) direct tax collection for April-December period this fiscal was Rs 7.43 lakh crore, up 13.6% from the year-ago period. However, traders may be getting some encouragement with the central statistics office’s (CSO) latest data showing that Indian economy is expected to grow at 7.2% in 2018-19, a tad higher from 6.7% in the previous fiscal, mainly due to improvement in the performance of agriculture and manufacturing sectors. Besides, describing the 7.2% GDP growth projection for 2018-19 as very healthy, Economic Affairs Secretary Subhash Chandra Garg said India remains to be the fastest growing economy in the world. Meanwhile, Reserve Bank Governor Shaktikanta Das said the central bank will take steps if there is a shortage of liquidity in the economy though the current cash needs are largely met. Pointing out that liquidity in the system is regularly monitored, Das said the RBI will take steps whenever there is any deficit.

The US markets ended higher on Monday as gains in the technology and consumer discretionary sectors helped extend Friday’s rally, with investors focused on the ongoing US-China trade talks. Asian markets were trading mostly in green on Tuesday tracking overnight rise on the Wall Street, where equities rallied on optimism fresh talks on trade will be productive.

Back home, firm cues from Asian counters coupled with rising direct tax collection data kept Indian equity benchmarks higher on Monday, with Sensex and Nifty closing the trading session above 35,800 and 10,750 levels, respectively. Revenue from direct tax grew 13.6% to Rs 7.43 lakh crore in the first nine months of the current financial year 2018-19 (April-March). The government has met more than 64.7% of the total budget estimate of direct taxes, for which the mop-up target is Rs 11.50 lakh crore.  After a firm start, the key indices remained positive throughout the day, aided by the Federation of Indian Chambers of Commerce and Industry (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 7.5-7.6% in 2019-20. He added that the economy is on a good footing. Some support also came 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. The street also got relief with reports that Commerce and industry minister Suresh Prabhu will meet the banking and financial services secretaries next week to resolve the huge decline in bank credit to exporters. During the trade, the market participants were also seen taking note of Governor Shaktikanta Das’ statement that the Reserve Bank of India (RBI) will not like the banking system to be in a situation of loose money. He further said that the RBI is also looking at new governance reforms for state-owned banks but will not throttle their functioning. However, the last leg sell-off along with weak cues from European markets dragged the markets from their intraday high points. Domestic sentiments got hit with a private report stating that India may have to forgo as much as $1.97 trillion in gross domestic product (GDP) growth promised by investment in intelligent technologies over the next decade if the country fails to bridge the skill gap. Anxiety also persisted among the traders, as the RBI warned that a sudden surge in crude prices can upset the country’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. Adding more concerns, 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. Finally, the BSE Sensex gained 155.06 points or 0.43% to 35,850.16, while the CNX Nifty was up by 44.45 points or 0.41% to 10,771.80.