Benchmarks likely to make negative start

Indian markets snapped three-day losing streak and ended higher with notable gains on Tuesday on easing retail inflation and hopes of monetary easing. Today, the markets are likely to make negative start amid mixed cues from Asian counterparts. Traders may take note of the commerce ministry’s data showing that the country’s exports grew marginally by 0.34% to $27.93 billion in December 2018 on account of negative growth in sectors such as engineering and gems & jewellery. Besides, imports dipped by 2.44% to $41 billion during the last month due to lesser imports of gold, pearls, precious and semi- precious stones. India’s trade deficit narrowed to $13.08 billion in December, the lowest in 10 months, as compared with $16.7 billion in November, due to a fall in gold imports. However, traders may take some support with the Reserve Bank of India’s (RBI) statement that it would inject Rs 10,000 crore into the system through purchase of government securities on January 17 to increase liquidity. The purchase will be made through open market operations (OMOs). The RBI plans to inject liquidity under OMOs for Rs 50,000 crore in January 2019. The central bank has so far injected Rs 20,000 through OMOs in January. Meanwhile, the Fertiliser Ministry has sought additional Rs 23,000 crore from the Finance counterpart to meet the subsidy requirement for the January-March quarter. Till December, a subsidy payment of Rs 23,283 crore was due towards fertiliser companies and the ministry was left with about Rs 13,056 crore from the budgeted allocation. There will be some reaction in steel sector stocks with report that the government is considering raising import duty on iron ore, a key raw material used in steel making, with a view to protecting the domestic industry. The low import duty of 2.5% encourages steel players to go for import rather than utilising the local ore. There will be some buzz in the real estate sector stocks with report that a ministerial panel headed by Gujarat Deputy Chief Minister Nitin Patel would look into the possibility of rationalisation of GST rate in real estate sector besides formulating a composition scheme. The Group of Ministers (GoM) will also analyse tax rate of GST, including issues/challenges in view of the proposal for shoring up the real estate sector. There will be some important result announcements to keep the markets in action.

The US markets ended in green on Tuesday as investors welcomed China’s pledge to stimulate the country’s ailing economy coupled with the rally in technology companies stocks. Asian markets were trading mixed on Wednesday with investors assessing Brexit options after British lawmakers trounced Prime Minister Theresa May’s deal to pull out Britain from the European Union.

Back home, Bulls made comeback on Dalal Street on Tuesday, with both the larger peers ending the trading session with strong gains of around 1.30% each. After a fabulous start, the key indices remained firm throughout the session, as India’s retail inflation based on Consumer Price Index (CPI) continued its easing trend for third straight month in December mainly on account of sliding prices of fruits, vegetables and fuel. CPI softened to an 18-month low of 2.19% in December 2018 as compared to 2.33% in November and 5.21% in December 2017. The inflation has remained below the RBI’s medium-term target of 4% for the fifth straight month and it fell to its lowest level since June 2017 of 1.46%. Investors remained encouraged amid reports that the government is considering credit guarantee for term loans of up to Rs 100 crore as well as interest subsidy on loans up to Rs 1,000 crore for electronic manufacturing companies under the new policy in works. Some comfort also came with another report that India is likely be a larger economy than the US by 2030, while China will top the list and Indonesia will figure among the top five. India will likely be the main mover, with its trend growth accelerating to 7.8% by 2020s, partly due to ongoing reforms, including introduction of GST and the Insolvency and Bankruptcy Code (IBC). The markets managed to hold their rally with a report that the total of investments during 2018 by private equity (PE) and venture capital (VC) companies was $35.1 billion (nearly Rs 2.5 trillion), surpassing the previous high of $26.1 billion (Rs 1.8 trillion) in 2017 by 35 per cent. The report further said that start-ups rebounded in 2018, attracting $6.4 billion (Rs 45,000 crore) or 83 per cent higher than in 2017. Trading sentiments were also got boost after UN report showed that India's creative goods exports nearly tripled from $7.4 billion in 2005 to $20.2 billion in 2014, making it one of the world's leading exporters of such products in the top 10 developing economies. Adding more support, apex industry body, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said 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. Finally, the BSE Sensex gained 464.77 points or 1.30% to 36,318.33, while the CNX Nifty was up by 149.20 points or 1.39% to 10,886.80.