Markets likely to open in green on Tuesday

Indian markets ended lower for third straight session on Monday mirroring losses across the globe after an unexpected contraction in Chinese exports raised fears of a sharper global slowdown. Today, the markets are likely to make positive start tracking firm Asian peers coupled with easing retail inflation. Retail inflation declined to an 18-month low of 2.19 per cent in December 2018 mainly on account of sliding prices of fruits, vegetables and fuel. The inflation based on the Consumer Price Index (CPI) was 2.33 per cent in November and 5.21 per cent in December 2017. The previous low inflation was 1.46 per cent in June 2017. CPI is the main price gauge that the Reserve Bank of India (RBI) tracks. Traders may take note of Former chief economic advisor Kaushik Basu’s statement that the RBI could slightly reduce interest rate to boost growth. Also, apex industry body ASSOCHAM stated that Wholesale Price Index (WPI) has recorded 3.80 per cent for December 2018 as compared to 4.64 per cent for the previous month due to sharp decline in price of vegetables, onion and fruits. The continuing deceleration in the growth of WPI and softening of global fuel prices provide ample opportunity to MPC (monetary policy committee) to cut down policy rate at earliest which will kick start investment and revival in overall industrial growth. Meanwhile, domestic ratings agency ICRA has said there is a compelling case to revisit the restrictive retail foreign direct investment (FDI) policy as India has not been able to get sizeable investments despite opportunities. However, there may be some cautiousness with a private report that the RBI could pay between Rs 20,000 crore and Rs 25,000 crore to the government, but even that would not be enough for it to meet its non-tax revenue target of Rs 2.45 trillion. There are already concerns over the goods and services tax (GST) collections and the government overshooting expenditure in this fiscal year (2018-19 or FY19). There will be some buzz in the banking sector stocks with report that in a bid to align with the best corporate practices, the Finance Ministry has asked the public sector banks to gradually bring down the government's equity to 52 per cent. There will be some result reactions too, to keep the markets in action.

The US markets fell on Monday, extending their losses for second straight session, after downbeat Chinese economic data added to signs of slowing growth around the world. Asian markets were trading in green on Tuesday, as markets recovered from the impact of weak economic data in Europe and China Monday that sparked concerns about slowing global growth.

Back home, weak Indian industrial growth pulled key equity benchmarks down on Monday, with both the larger peers extending their losing streak for third consecutive session. Industrial growth measured by Index of Industrial Production (IIP) slipped to a 17-month low of 0.5% in November 2018, as compared to 8.5% in November 2017, on account of contraction in manufacturing sector, particularly consumer and capital goods. The previous low was in June 2017, when IIP growth contracted by 0.3 per cent. The markets made a negative opening of the week, impacted by Asian Development Bank (ADB) Country Director Kenichi Yokoyama’s statement that farm loan waivers were against economic principles and cannot effectively address the agrarian distress. Domestic sentiments also got hot with private report stating that meeting the fiscal deficit target of 3.3 per cent of GDP for the current fiscal could be a challenge for the government, given the shortfall in GST collections, rising expenditure and slowing factory output. Further, in noon deals, easing wholesale price index (WPI) inflation failed to provide relief to the markets. WPI inflation eased for the second straight month in December 2018. According to the latest data released by the government, WPI slowed down to 3.80 percent in December from 4.64 percent in November. The trade remained lackluster throughput the day, following weak global markets. The street remained cautious as the Reserve Bank remained a net seller of dollars in November 2018, as it sold $ 644 million of the greenback on a net basis in the spot market. As against this, in November 2017, the Central bank had purchased $ 2.570 billion from the spot market and sold $ 1.706 billion, while in the reporting month, the monetary authority bought $ 3.127 billion from the spot market, and sold $ 3.771 billion. The trading sentiments failed to cheer with Finance Minister Arun Jaitley’s statement that the government will forego revenue of close to Rs 1 trillion on all the items whose rates have revised to lower slabs under the goods and services tax (GST) regime. He also said that the various income tax benefits given to the middle class during the Narendra Modi government's existing tenure will lead to revenue foregone of Rs 97,000 crore. Investors also overlooked industry minister Suresh Prabhu’s statement that the government wants to focus on the districts as part of a bottoms-up approach for boosting growth. Finally, the BSE Sensex lost 156.28 points or 0.43% to 35,853.56, while the CNX Nifty was down by 57.35 points or 0.53% to 10,737.60.