Markets to make cautious start of F&O expiry session

Late hour selling mainly played a spoil sport for Indian equity markets to settle near intraday low levels on Wednesday on account of heavy profit booking and lackluster global cues. Today, the start of the F&O series expiry session is likely to be a bit cautious tailing the weak global cues amid growth concerns. There will be some cautiousness with report that there is a shortfall in income tax collections. Progress in tax collection has been reviewed as against the targeted Rs 12 lakh crore. Only 85.1% of the targeted or Rs 10.21 lakh crore has been collected as of March 23. A head-wise analysis indicates negative growth in regular collection at 6.9% as compare a negative 5.2% last week. This is alarming and needs immediate attention. Traders will also be reacting to the finance ministry’s statement that currency in circulation as percentage of Gross Domestic product (GDP) declined by over 1 percentage points to 10.48% in the two years after demonetization. The government had demonetised currency notes of 500 and 1000 denomination on November 8, 2016, to check black money. However, some support may come with report that India's monsoon, crucial for Asia's third largest economy, is likely to be a robust and healthy one this year provided there isn't a surprise El Nino phenomenon. Monsoon rains, the lifeblood for India's farm-dependent $2.6 trillion economy, arrive on the southern tip of Kerala state around June 1. Traders may take note of a report that the Reserve Bank of India (RBI) is likely to cut repo rate by 25 basis points in the April policy due to weak economic activity. The monetary policy committee is scheduled to meet from April 2 to 4. There will be some reaction in hotel industry stocks with ICRA's report that the domestic hotel industry is expected to register a top line growth of 10-11% in 2019 than the earlier expectation of 8.5%. According to the report, the demand for room is expected to continue to grow by about 8-9% year-on-year over the medium term, led by increasing domestic travel, buoyant meetings, incentives, conferencing and exhibitions (MICE) activity and higher FTAs, despite immediate headwinds from global geopolitical concerns and increasing local airfare.

The US markets ended Wednesday’s choppy session lower with lingering worries over the economic growth outlook. Asian markets are trading mostly in red on Thursday following an overnight slip on Wall Street after the closely-watched 10-year Treasury yield touched its lowest in more than a year.

Back home, Indian markets wiped out all of their early gains and ended lower on Wednesday amid profit booking, with Sensex and Nifty closing the session below their psychological levels of 38,200 and 11,450, respectively. After a firm start of the day, key indices remained positive for the most part of the session with Vice President of India, M. Venkaiah Naidu’s statement that tax reforms were slowly increasing India’s tax base and shifting the social norms from one where it was alright to avoid taxes to one where the majority is willing to pay. Traders took support with a report that the RBI has received a good response to its dollar swap window on March 26, establishing the instrument as a credible liquidity tool and paving the way for more such auctions in the coming months. Banks offered $16.31 billion for the proposed swaps of up to $5 billion. The RBI accepted $5.02 billion at a cut-off premium of Rs 7.76 for three-year dollars - close to the rate at which the market was trading at. Some comfort also came with a private report indicating that although 2018 brought some cyclical challenges, India maintains top ranking in overall consumer sentiment, while Brazil has overtaken China to come second. However, in the last hours of the trade, the markets gave up their gains to settle in negative territory, amid weak cues from global markets. Domestic sentiments got hit after former RBI Governor Raghuram Rajan expressed doubts over Indian economy growing at 7% when not enough jobs were being created. The market participants overlooked Prime Minister Narendra Modi’s announcement that India has emerged as a Space Power today; till now only US, Russia and China have achieved this; now India is the 4th country to achieve this feat. He added that, ‘we have enough satellites that are contributing in various segments such as agriculture, disaster management, communication, weather, navigation etc.’ Moreover, India has successfully targeted a live satellite, anti-satellite weapon A-SAT, on a low Earth orbit. Mission Shakti took three minutes to complete. The PM added ‘our aim is to maintain peace over war mongering.’ Finally, the BSE Sensex fell 100.53 points or 0.26% to 38,132.88, while the CNX Nifty was down by 38.20 points or 0.33% to 11,445.05.