Benchmarks to make cautious start on sluggish global cues

Indian equity markets continued their downtrend this week, ending lower on Thursday  led by a fall in information technology (IT), metal and financial stocks.  The sentiment turned negative tracking mixed trend in other Asian markets. Today, the start is likely to be a cautious on weak global cues. There will be some cautiousness with the economic research wing of SBI stating that it is erroneous to come to a conclusion of heightened economic activity using the jump in currency in circulation (CIC). It estimated that cash in the economy at Rs 20.4 lakh crore, stressing the rural economy continues to be depressed. It pointed out to data from leading indicators, including passenger car sales, commercial vehicle sales and two wheeler sales, among others, which shows a dip in activity, to point out that the higher CIC does not suggest a jump in economic activity. However, traders may get some encouragement in later part of trade as Chief Economic Adviser K V Subramanian has said it is expecting that the economic growth will accelerate to 7.5% in next financial year (FY20), from 7.2% projected for the current financial year (FY19). He further stated in the last four years the GDP growth rate has been 7.3% that was highest across all government since liberalisation. This growth rate has been achieved amidst very low inflation. Meanwhile, the Finance Ministry is on course to meeting the NPA recovery target of Rs 1.8 lakh crore by March 31, 2019 with the recoveries already touching Rs 1.08 lakh crore and many big-ticket default cases reaching resolution.  The sugar sector stocks will be in action as the government hiked the minimum selling price of sugar by Rs 2 per kg to Rs 31. This will help millers to make the payment to sugarcane growers. There will be some buzz in the real estate sector stocks with Finance Minister Piyush Goyal’s statement that the government is considering giving relief to the real estate sector and the next GST Council meeting could take some steps to address their issues even as he asked the banks to meet the realty sector on stalled projects in two weeks.  Also, there will be some reaction in NBFC stocks as RBI governor Shaktikanta Das ruled out asset quality review of Non -Banking Finance Companies (NBFCs).  Meanwhile, banks lending to NBFCs rose 4.4% in the December quarter to Rs. 24,200 crores when mutual funds slammed the doors on them after Infrastructure Leasing & Financial Services defaulted on bond payments. This growth compares with a shrinking of 4.7 percent in the same quarter a year ago.

The US markets settled mostly in red on Thursday on account of weak retail sales data.  US retail sales fell by 1.2% in December, the largest single-month decline since 2009. Asian markets have made a weak start and now are trading in red after grim US retail sales figures raised fresh doubts about the strength of the US economy, offsetting optimism on trade talks between the United States and China.

Back home, bears tightened their grip on Dalal Street as key gauges extended southward journey for fifth straight day, settling with a cut of around half a percent. Markets started the session on cautious note as traders remain concerned with report that volatile crude oil prices, a strong dollar and rising US bond yields has resulted in foreign institutional investors (FIIs) turning big sellers in the Indian market. Out of the 425 companies on the BSE-500 index, for the quarter ending December (Q3), there has been a decline in FII holdings in 256 companies, while only 169 companies saw net buying by FIIs. Cautiousness also crept in with the Reserve Bank of India’s (RBI) data showing that both bank credit as well as deposits growth marginally declined on a fortnightly basis, clipping at 14.5 percent at Rs 94.29 lakh crore deposits grew at a tepid 9.63 percent to Rs 121.22 lakh crore for the fortnight ending February 1.  Markets continued their lackluster trade till end, as traders ignored ease in wholesale price index (WPI) inflation data.  Wholesale prices in India eased to 2.76 percent in January, as compared to 3.80 percent in December, due to cheaper food and fuel prices. Wholesale inflation, measured by the Wholesale Price Index (WPI), grew 3.02 percent in January 2018. Trader remained pessimistic even after the Cabinet Committee on Economic Affairs approved the Credit Linked Capital Subsidy and Technology Up-gradation Scheme (CLCS-TUS) with a total outlay of Rs 2900 crore. The scheme will facilitate technology up-gradation to MSEs, improvement in Quality of products by MSMEs, enhancement in productivity, reduction in waste and shall promote a culture of continuous improvement. Traders failed to get any sense of relief with report that the cabinet is expected to soon consider a proposal of FDI-linked relaxation for mandatory 30 per cent local sourcing norms for foreign single brand retailers by allowing them more time to comply with regulations. Finally, the BSE Sensex fell 157.89 points or 0.44% to 35,876.22, while the CNX Nifty was down by 47.60 points or 0.44% to 10,746.05.