Markets to make cautious start of the F&O series expiry week

Indian markets ended a choppy session on a flat note on Friday amid selling pressure after RBI MPC minutes expressed concerns about growth. Today, the markets are likely to make a cautious start of the F&O series expiry week despite positive cues from Asian peers. There will be some cautiousness with report that foreign portfolio investors sold debt securities worth over Rs 1,900 crore in February amid escalation of cross-border tensions in the wake of Pulwama terror attack. Latest data from the depositories showed that overseas players pumped in Rs 2,039 crore into equities even as they dumped debt during February till 22. Traders will also be concerned about Financial Services Secretary Rajiv Kumar’s statement that ensuring intermediation by financial institutions like banks and NBFCs in a clean manner is one of the major challenges faced by the Indian banking sector. He added that making credit rating agencies more accountable is also another challenge. However, some support may come later in the day with Commerce and industry minister Suresh Prabhu’s statement that the government is making a strategy to make India a $5 trillion economy and simultaneously fine tuning the plan to take it to $10 trillion. Some support may also come with the Central Board of Indirect Taxes and Customs (CBIC) setting up three working groups to suggest ways to facilitate exports, especially through e-commerce, and improve compliance by way of curbing tax evasion. Meanwhile, the Reserve Bank of India (RBI) announced that it will merge three categories of Non Banking Financial Companies (NBFCs) into a new one. According to a release, NBFCs categorized as Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs), will be merged into a new category called NBFC - Investment and Credit Company (NBFC-ICC). There will be some buzz in the real estate sector stocks with report that the Goods and Services Tax (GST) Council slashed tax rate on under-construction residential properties, making the effective tax rate 5% for the normal category and 1% for the affordable housing category. In both cases, builders will not be able to claim the input tax credit (ITC). There will be some reaction in banking sector stocks with report that the finance ministry expects three to four more lenders to come out of weak bank list of the Reserve Bank in the next six to eight months on account of improvement in financial health amid capital infusion and falling bad loans.

The US markets ended higher on Friday as traders continued to express optimism about ongoing trade talks between the US and China. Asian markets are trading mostly in green on Monday after US President Donald Trump confirmed he would delay a planned increase on Chinese imports as talks between the two sides were making substantial progress.

Back home, the last trading day of the week turned out to be a choppy session for key Indian equity benchmarks, with the both the larger peers, Sensex and Nifty, closing the trading session on flat note. The equity markets made a negative start of the day, with Moody’s statement that the fresh round recapitalisation of 12 state-run banks is positive as it will help them improve their core capital but a complete turnaround is still away due to the large quantum of legacy bad loans. It said these banks are far from a complete turnaround as large volumes of problem-loans will still continue to cap improvements in profitability and capitalisation, constraining their credit profiles. Domestic sentiments remained subdued after the release of the minutes of Reserve Bank of India (RBI) last policy meet, in which governor Shaktikanta Das argued the need to look at growth concerns. However, further fall in markets remained capped, amid Niti Aayog’s note stating that the host of reforms undertaken by the government has transformed India into the fastest-growing major economy along with the macroeconomic stability not witnessed in the past. The street got some relief with the CriSidEx survey stating that micro and small enterprises (MSEs) are becoming more optimistic about their business prospects. The CriSidEx index rose to 128 in Q3FY19, the highest score since its inception. In comparison, the index was at 107 in Q3FY18. Adding some support, Commerce and Industry Minister Suresh Prabhu said that India and Russia are working to address and resolve trade and investment issues to facilitate and increase private sector cooperation between the countries. Meanwhile, Retirement fund body Employees' Provident Fund Organisation (EPFO) has announced an increase in interest rate to 8.65 percent from 8.55 percent on PF deposits for 2018-19, to its 6 crore subscribers. Finally, the BSE Sensex fell 26.87 points or 0.07% to 35,871.48, while the CNX Nifty was up by 1.80 points or 0.02% to 10,791.65.