Benchmarks to make gap-down opening of F&O series expiry week

Indian markets ended Friday’s trading session in red territory as investors booked profits from recent gains. Today, the markets are likely to make a gap-down opening of the F&O series expiry week tailing the weak global cues amid growing concerns about an impending US recession. There will be some cautiousness on the domestic front ahead of the fiscal deficit and infrastructure output data for the month of February are slated for a release later in the week. However, some support may come later in the day with the Reserve Bank of India (RBI) report showing that India’s foreign exchange reserves surged by a whopping $3.602 billion to $405.638 billion in the week to March 15, driven by rise in foreign currency assets. Traders may also reacting to the Employees' Provident Fund Organisation (EPFO) data showed that net employment generation in the formal sector touched a 17-month high of 8.96 lakh in January. The addition in January was 131% higher as compared with 3.87 lakh EPFO subscribers added in the year-ago month. Meanwhile, the Government said it has exceeded its disinvestment target for the current fiscal by Rs 5,000 crore and the proceeds have touched Rs 85,000 crore. The government has mopped up Rs 9,500 crore from the fifth tranche of CPSE ETF and Rs 14,500 crore from the REC-PFC deal. There will be some buzz in the banking sector stocks with report that the RBI has deferred the implementation of the new accounting norms, Ind AS, indefinitely, as necessary amendments to the relevant law are yet to be made. The move will bring huge relief to the banks which are yet to recognise stressed assets and make necessary provisions as that would require higher capital. There will be some reaction in housing finance companies (HFCs) stocks with ICRA’s report that the liquidity crisis has crimped credit growth for HFCs and is unlikely to improve much in FY20, even as the weak external environment will put a pressure on asset quality.

The US markets ended sharply lower on Friday after a US recession indicator blinked red and a report on German manufacturing raised concerns about Europe's most important economy. Asian markets are trading in red on Monday as investors fled to the safety of bonds as on growing worries about an impending US recession, sending global yields plunging.

Back home, equity benchmarks saw sluggish trading session on Friday, with Sensex and Nifty closing lower by over half a percent each. The start of the day was positive, aided by the International Monetary Fund’s (IMF) statement that the country has been one of the fastest growing large economies in the world, with growth averaging about 7% over the past five years. IMF said important reforms have been implemented and it feel that more reforms are needed to sustain this high growth, including to harness the demographic dividend opportunity, which India has. Some support also came with report that Finance Minister Arun Jaitley has made a case for setting up GST Council-like federal institutions to promote healthcare, rural development and agriculture sectors by optimally utilising resources of the centre and states. He said agriculture, rural development and healthcare is one area where the central government spends a lot of money on supporting farmers, creating infrastructure and building health centres for poor population. But, bourses failed to hold gaining momentum and turned negative in noon deals, as Fitch Ratings in its Global Economic Outlook lowered India’s Gross domestic product (GDP) growth forecast to 6.8% for fiscal year 2020  from 7% estimated earlier, on the back of weaker than expected momentum in the economy. Some anxiety also came in with a report that India expressed concern over the widening trade deficit with China which has ballooned to over $58 billion, with the country’s new envoy saying that addressing the issue would be his top priority. Sentiments also remained downbeat with a private report that the liquidity crisis in the non-banking finance companies (NBFC) space triggered by the default of infrastructure ending major IL&FS last September is continuing to have an impact on mutual fund (MF) deployments in the sector. The overall exposure of debt MFs to NBFCs stood at Rs 2.2 lakh crore in February, a drop of Rs 45,386 crore since July 2018 when the liquidity stress first emerged. Finally, the BSE Sensex lost 222.14 points or 0.58% to 38,164.61, while the CNX Nifty was down by 64.15 points or 0.56% to 11,456.90.