Markets to make cautious start of F&O expiry session; GDP data eyed

Indian markets ended lower for second straight session on Wednesday as tensions between India and Pakistan escalated. Today, the start of the F&O series expiry session is likely to be cautious tailing the weakness in other global markets. The conflict between India and Pakistan may also weigh on investor sentiments. Traders will be eyeing the data print for the December quarter GDP and core sector data that will be announced later in the day. Traders will be concerned about a private report stating that India's economy appeared to be losing momentum in the approach to a general election that must be held by May. The report forecast that growth slipped to 6.9% annually in the October-December quarter. Also, there will be some cautiousness with Fitch Ratings’ statement that government's $7 billion (around Rs 48,000 crore) fund infusion into public sector banks (PSBs) would not be sufficient to support significantly stronger lending growth. Fitch estimated that banks would need an additional $23 billion (around Rs 1.6 trillion) in 2019, after these latest injections, to sufficiently meet minimum capital standards. However, some respite can come later in the day with a private report indicating that private equity (PE) investments in India witnessed a 36 per cent growth to $1,325 million despite fall in volume on account of increased follow-on investments last month as compared to a year ago. There will be some buzz in the steel sector stocks with rating agency Crisil’s statement that domestic iron ore prices are likely to rise by 3-4% in 2019 on account of global supply glitch. Further, domestic steel prices are likely to soften following global cues. There will be some reaction in cement sector stocks with India Ratings report stating that domestic cement demand is expected to register a modest growth of 6-8% in fiscal 2020 mainly driven by the diminishing base effect, increased thrust on infrastructure by the Central government and the affordable housing segment.

The US markets ended mostly lower on Wednesday as investors focused on separate congressional testimonies from US Trade Representative Robert Lighthizer on US-China trade negotiations and a second day of Congressional hearings featuring Federal Reserve Chair Jay Powell. Asian markets are trading mostly in red on Thursday amid a spate of geopolitical concerns ranging from escalating tensions between India and Pakistan to US-China trade uncertainty.

Back home, key Indian equity benchmarks gave up their gains on Wednesday to end the trading session in negative territory. The start of the day was jubilant, taking support with the Reserve Bank of India (RBI) stating that it would infuse Rs 12,500 crore into the system through open market operations. The decision on OMO is based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward. Traders took encouragement with a report that consumer market is expected to grow at 12 percent annually over the next decade and touch Rs 335 lakh crore. The consumer market was around Rs 110 lakh crore in 2018, clipping past 13 percent annually in the past decade when it stood at Rs 31 lakh crore in 2008. Some comfort also came with Corporate Affairs Secretary Injeti Srinivas’ statement that the government would soon take effective steps to discourage people from making frivolous bids under the Insolvency and Bankruptcy Code (IBC). He noted that the IBC mainly seeks to address the issue of stressed assets in a time-bound manner. However, the indices turned negative in afternoon deals to close lower, affected by the Controller General of Accounts’ (CGA) latest data showing that the central government’s fiscal deficit has widened and touched 121.5% of the full-year revised target of Rs 6.34 lakh crore at the end of January. The fiscal deficit, or the gap between the government's expenditure and revenue, stood at Rs 7.70 lakh crore during April-January of the current financial year ending March. Sentiments also got worsened after the government detected Rs 20,000 crore worth GST evasion so far this fiscal and will take more steps to check frauds and increase compliance. Adding worries among the traders, the Vice President of India, M. Venkaiah Naidu expressed concern over the recent incidents of indiscretion, mismanagement and greed that ruined many business organisations and individual reputation as he stressed up on the need to incorporate business ethics and values as an important and integral element of management education. Finally, the BSE Sensex lost 68.28 points or 0.19% to 35,905.43, while the CNX Nifty was down by 28.65 points or 0.26% to 10,806.65.