Benchmarks likely to make a cautious start

Erasing most of the early gains, Indian markets ended almost flat on Thursday after the Reserve Bank of India (RBI) unexpectedly cut the repo rate by 0.25% to 6.25%, saying inflation will likely stay within its target range. Today, the start of the session is likely to be cautious amid global growth concerns. However, some support may come later in the day with Finance Minister Piyush Goyal’s statement that the rate cut by the RBI will give a boost to the economy by providing affordable credit to small businesses and homebuyers. The RBI has reduced repo rate (at which RBI lends to banks) by 0.25% to 6.25%, a move that will translate into softening interest rates. Besides, welcoming the RBI's decision, Economic Affairs Secretary Subhash Chandra Garg said it is a very balanced and pragmatic policy statement. Meanwhile, India has jumped eight places to 36th position on the International Intellectual Property (IP) Index, which analyses the IP climate in 50 global economies, this year. India's eight-point jump in 2019 from 44th position in 2018 is the highest increase among 50 nations mapped by the index. The report said the improvement reflects important reforms implemented by Indian policy-makers towards building and sustaining an innovation ecosystem for domestic entrepreneurs and foreign investors alike. Besides, a report stated that as many as 21 firms including Religare Enterprises, Reliance Naval and Engineering, and Binani Industries have come under short-term additional surveillance measure (ASM) framework of the NSE. Under the short-term ASM framework, NSE said the applicable rate of margin is fixed at 1.5 times the existing margin or 40%, whichever is higher, subject to maximum rate of margin capped to 100%. There will be some buzz in the aviation sector stocks with an International Air Transport Association (IATA) report stating that there is an 18.6% annual increase in domestic aviation sector considering the rise in Indians preferring to fly across the country last year. Also, there will be some reaction in non-banking finance companies (NBFCs) stocks with report that the RBI has decided to assign risk weights for the rated exposures of banks to all NBFCs to facilitate credit flow to the sector that is reeling under liquidity pressure post IL&FS defaults in August. There will be lots of earnings reaction based on the performance of the companies.

The US markets ended sharply lower on Thursday as trade tensions and bleak economic data from Europe renewed fears of a slowdown in global growth. Asian markets are trading in red on Friday as investors fretted about a broadening global economic slowdown.

Back home, the Reserve Bank of India’s (RBI) the policy repo rate failed to enthuse Indian equity benchmarks on Thursday, as both the larger peers, Sensex and Nifty, settled the day almost flat. RBI in its sixth bi-monthly monetary policy review of 2018-19, has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect. The RBI also decided to change the monetary policy stance from calibrated tightening to neutral. The start of the day was firm, aided by Moody's Investors Service’s statement that the tax relief steps for the middle-class and direct cash transfer programme for farmers will give a fiscal stimulus of about 0.45% of Gross Domestic Product (GDP), and support growth through increased consumption over the near term, albeit at a fiscal cost. Some support also came with report that the government allowed export of bio-fuels from special economic zones (SEZs) and export-oriented units (EoUs) with certain conditions. In August 2018, the government imposed restrictions on export of bio-fuels for non-fuel purposes. In the second half of the session, the markets turned volatile and erased all of their gains to end the trading session flat, tracking weak global markets. Anxiety spread among the traders, after RBI raised concerns that in spite of soft crude oil prices and the lagged impact of the recent depreciation of the Indian rupee on net exports, slowing global demand could pose headwinds and added that in particular, trade tensions and associated uncertainties appear to be moderating global growth. The market participants paid no heed towards reports that the commerce ministry proposed several measures such as setting up of a separate fund, single-window e-marketplace and a law to define the role of various stakeholders, as part of the draft national logistics policy. The street also overlooked a report stating that the government decided to raise additional Rs 36,000 crore through dated securities during the current financial year (FY19), with an aim to meet additional expenses. The government will borrow additional Rs 36,000 crore through two tranches of Rs 18,000 crore each during March 11-15 and March 18-22. Finally, the BSE Sensex fell 4.14 points or 0.01% to 36,971.09, while the CNX Nifty was up by 6.95 points or 0.06% to 11,069.40.