Markets to make slightly positive start on Tuesday

Extending gains for third straight session, Indian markets settled higher on Monday, led by gains in heavyweight Reliance Industries. Today, the markets are likely to make slightly positive start tacking overnight gains on Wall Street. Traders will be looking ahead to the six-member Monetary Policy Committee (MPC) headed by Reserve Bank of Indian (RBI) Governor Shaktikanta Das three-day meet to be start on February 05 and announce the policy on February 07. Traders will be getting encouragement with Union Commerce Secretary Anup Wadhawan’s statement that the country's exports in the current fiscal year are expected to surpass the earlier peak of $314 billion in 2013-14. He added that the achievement comes against the backdrop of a very challenging global environment. Meanwhile, the government has decided to form a small working group to look into the issue of angel tax being faced by startups and come out with a workable solution in 4-5 days. However, there may be some cautiousness with the government data showing that fiscal deficit touched 112.4% of the full-year budget target of Rs 6.24 lakh crore at the end of December on account of lower revenue collections. The fiscal deficit, or gap between Government's expenditure and revenue, stood at Rs 7.01 lakh crore during April-December of the current financial year which ends in March. Traders may take note of a SBI research report stating that the RBI may cut key lending rate by 0.25 percent later this week in view of benign inflation. They expect RBI to change its stance in February, but it is likely to remain on a pause mode. The first cut might happen in April 2019, but they believe it will be shallow rate cut cycle. There will be some buzz in the telecom sector stocks with report that telecom firms, barring Reliance Jio, have asked the government to waive GST on spectrum payments and other levies, while adjusting accumulated tax credits of Rs 35,000 crore in the pending payments. There will be some reaction in sugar industry stocks with Indian Sugar Mills Association (ISMA) stating that sugar production rose 8% to 185 lakh tonnes in the first four months of this marketing year ending September, while cautioning that cane arrears to farmers could reach very uncomfortable levels.

The US markets rose on Monday, led by the technology sector, as investors awaited another busy week of corporate earnings reports and economic data. The Japanese stock market is trading in red on Tuesday, while most of the other Asian markets are closed for the Lunar New Year holiday.

Back home, last hour recovery helped the key Indian equity benchmarks to close Monday’s trading session in positive territory. The bourses made a negative start, impacted by Moody’s Investors Service’s statement that the government will find it difficult to meet the fiscal deficit target of 3.4% in 2019-20 on account of higher spending and low revenue growth. Observing that Indian government’s debt is stubbornly high as a percentage of GDP, Moody's said it could be brought down only if the Centre sticks to the fiscal consolidation path. The markets participants were nervous, amid reports that the government has reduced the allocation for Startup India programme in the Budget 2019-20 but added more monies to the Make in India kitty. According to the budget documents, the allocation for Startup India programme has been slashed to Rs 25 crore for 2019-20 from the revised estimate of Rs 28 crore in 2018-19. Sentiments also got hit with a private report stating that public sector investments are expected to grow at a much slower pace in 2019-20, as capital outlay by public sector enterprises is expected to remain at almost the same level as 2018-19, while capital spending by the Centre is budgeted to grow at a much slower pace next year. The trade remained lackluster for the most part of the session, as Fitch Solutions, the research arm of Fitch Group, also projected the government's fiscal deficit to overshoot the budgeted target by 0.2 percent to 3.6 percent of GDP in 2019-20 fiscal. It said that 2019-20 Budget appears to show a strong populist bent in the run up to the General election due by May 2019. Adding anxiety among the investors, the commerce and industry ministry data showed that foreign direct investment (FDI) into India has declined 11 percent to $ 22.66 billion during April-September period of the current fiscal. The foreign fund inflows during April-September 2017-18 stood at $ 25.35 billion. However, in the last leg of the trade, the key indices recovered from losses to end higher, supported by Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta’s statement that the new online National Logistics Portal (NLP) and forthcoming national policy would help boost India’s export growth. He also said that the sector assumes significance as reduction in logistics cost and time would help promote competitiveness of domestic products in global markets. Finally, the BSE Sensex gained 113.31 points or 0.31% to 36,582.74, while the CNX Nifty was up by 18.60 points or 0.17% to 10,912.25.