Benchmarks to make positive start of the new week

Indian equity markets wiped out early gains to end notably lower on Friday as weak third quarter earnings overshadowed positive cues from global markets. Today, the start of the new week is likely to be marginally in green tacking positive global cues. Traders will be getting encouragement with the Economic Advisory Council to the Prime Minister’s (EAC-PM) statement that India's economic growth is expected to remain in the range 7-7.5 per cent in the next few years. The council observed that the growth rate can be easily increased by 1 per cent by addressing structural problems through reforms. Some support will also come with Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra’s statement that the government will exceed the direct tax target of Rs 11.5 trillion in the financial year 2018-19. Traders may take note of Union Commerce and Industry Minister Suresh Prabhu stating that new policies of the government will ensure the doubling of exports, currently pegged at $321 billion, in a few years. He said the policy focuses on five key elements, namely agriculture, horticulture, plantation, fisheries and meat. Meanwhile, the Union cabinet is likely to approve a package for farmers to boost their income and address distress in the farm sector, the move will come ahead of the general elections. However, there may be some cautiousness with Moody’s Investors Service’s statement that the steps announced by the government to aid MSMEs and the measures being planned to support farmers will increase the risk of fiscal slippage and push deficit to 3.4 per cent of GDP in the current financial year. The government budgeted the fiscal deficit for the current financial year at 3.3 per cent of the gross domestic product (GDP). Besides, foreign investors have pulled out close to Rs 6,000 crore so far from the Indian stock markets in January and experts believe this trend will continue in the coming months as well. There will be some buzz in the banking sector stocks with report that the government has empowered PSU banks to request lookout circulars (LOCs) against wilful defaulters and fraudsters. The Home Ministry has also authorised the Serious Fraud Investigation Office (SFIO), a statutory corporate fraud investigation agency, to request LOCs if it feels the suspect may escape from India.

The US markets ended in green on Friday, as mostly positive earnings results and a report that the Federal Reserve will maintain a larger portfolio of Treasury securities helped boost investor sentiment. Asian markets are trading higher on Monday as Wall Street rallied after a deal was announced to reopen the US government following a prolonged shutdown that had shaken investor sentiment.

Back home, last hour sell-off pulled Indian equity benchmarks lower on Friday, with both the larger peers, the Sensex and the Nifty ending the session lower by over 150 and 50 points, respectively. The markets made a fabulous start of the day, aided by apex exporters’ body, Federation of Indian Export Organisations (FIEO) stating that the tariff war between the US and China is benefitting India as its exports to the neighbouring country have increased by about 32 per cent during the June-November 2018 period to $8.46 billion. Exports to China had stood at $6.37 billion in June-November 2017. Growth in exports to China is beneficial for India as it has huge trade deficit with the neighbouring country. Adding some optimism, Vice President M Venkaiah Naidu said that the country's Goods and Services Tax would usher in long term gains despite initial problems and claimed that the world would take a cue from the GST experiment. However, key indices failed to hold the momentum and ended the session in negative terrain, despite positive cues from global markets. Domestic sentiments got hit after Global rating agency Moody’s said that the government policies to support the incomes of small enterprises and low-income households ahead of Lok Sabha elections will make fiscal consolidation harder. It further said that the fiscal deficit may touch 3.4 per cent of gross domestic product (GDP) for year ending March 2019, breach the target of 3.3 per cent. Adding some anxiety, United Nations head Antonio Guterres said that trade tensions impacting the world economy were essentially a ‘political problem’ and warned that a fragmented response to global challenges was a recipe for disaster. The street overlooked reports that India has emerged as one of the world's most-dynamic economies, developing at a great pace and keeping at the forefront of technology and social innovation. Finally, the BSE Sensex lost 169.56 points or 0.47% to 36,025.54, while the CNX Nifty was down by 69.25 points or 0.64% to 10,780.55.