Markets likely to make cautious start on Tuesday

Indian equity markets extended their losses for second consecutive session on Monday, as Sensex and Nifty settled with cut of around a percent, following global sell-off on growing fears of US economy entering into recession. Today, the markets are likely to make a cautious start amid mixed global cues. Traders will be concerned about state-run India Meteorological Department’s (IMD) statement that its study of global models shows that there is little chance of a strong El Nino in 2019. A strong El Nino could have an adverse impact on India’s southwest monsoon that starts from June as almost 80 per cent of El Nino years have seen below normal rains. There will be some cautiousness with a report stating that food inflation in the country is likely to go up to 2 per cent in the financial year 2019-20 from the 0.7 per cent estimated for FY19. The report noted that the low food prices have been one of the prime factors which have aided the RBI to be more accommodatory in its rate setting recently. Traders will also be reacting to the Employees State Insurance Corporation (ESIC) data showing that job creation fell by 6.91 per cent in January to 11.23 lakh compared to 12.06 lakh in the same month last year. During September 2017 to January 2019, as many as 2.08 crore new subscribers joined the ESIC scheme. However, traders may get some support later in the day with the finance ministry’s statement that the liquidity situation in the economy was comfortable, and it will improve further with the central bank’s move to infuse Rs 35,000 crore through the rupee-dollar swap arrangement, announced last week. Meanwhile, markets regulator SEBI has reviewed and modified the commission as well as disclosure norms for the mutual fund industry. There will be some buzz in the telecom sector stocks with ICRA’s report stating that the Reliance Jio-induced pains for the telecom sector will continue with the industry slated to report decline in revenue for the third consecutive year. However, it said there is room for a minor recovery in the upcoming fiscal year 2019-20. Also, India is considering to seek extension of the deadline set by the US for withdrawal of export benefits to domestic exporters under Generalized System of Preferences (GSP) programme.

The US markets ended Monday’s choppy trading session mostly lower, as investors wrestled to make sense of newly pessimistic outlooks for the global economy. Asian markets are trading mostly higher on Tuesday as European and North American markets stabilised in the overnight session.

Back home, Indian equity benchmarks remained in grip of bears on Monday, with both the larger peers, Sensex and Nifty closing the trading session lower by around 0.90%, each. The start of the day was somber on account of weak global cues amid growing concerns about an impending US recession. Adding some worries on the street, Vice President of India M. Venkaiah Naidu called for a renewed focus on rural health care and cautioned that the quality of healthcare being delivered cannot be determined by the price being paid. Sentiments also remain dampened, as credit rating agency ICRA in its latest report warned that the tight liquidity has crimped credit growth for housing finance companies (HFCs) and is unlikely to improve much in FY20, even as the weak external environment will put a pressure on asset quality. It noted that HFCs are likely to register a 13-15% credit growth in FY19, which will inch up to 14-16% in FY20. Markets remained under pressure throughout the day, tracking weak global markets. Domestic sentiments also remained pessimistic with a private report stating that India's industrial production is expected to stay muted in the near term, owing to weak exports, rural distress, credit constraints and uncertainty over the election outcome. According to the report, the Index of Industrial Production (IIP) is likely to have grown by 3-3.2 per cent during February 2019. Investors paid no heed towards the Reserve Bank of India’s (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 also failed to take any sense of relief with the Employees' Provident Fund Organisation (EPFO) data report 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. Finally, the BSE Sensex lost 355.70 points or 0.93% to 37,808.91, while the CNX Nifty was down by 102.65 points or 0.90% to 11,354.25.