Benchmarks likely to open in green on Friday

Indian markets extended their losses for second straight session on Thursday and settled lower with losses of around half a percent, after the Reserve Bank of India (RBI) cut its repo rate by 25 bps, as widely expected, but trimmed the growth and inflation outlook, saying the domestic economy is facing headwinds, especially on the global front. Today, the markets are likely to open in green tracking gains in Asian peers. Traders will be getting encouragement with Finance Secretary Subhash Chandra Garg’s statement that the government is close to meet fiscal deficit target of 3.4 per cent for 2018-19. The government in the interim Budget in February revised upward the fiscal deficit target to 3.4 per cent from 3.3 per cent of Gross Domestic Product (GDP) estimated earlier for the financial year ended March 31. Some support will also come with report that the Income Tax department said it added 1.07 crore new taxpayers while the number of ‘dropped filers' came down to 25.22 lakh in 2017-18, showing the positive impact of demonetisation. However, there may be some cautiousness as Fitch Ratings kept India’s sovereign rating unchanged at the lowest investment grade of BBB- with a stable outlook. This is the 13th year in a row that Fitch has rated India at BBB-. Fitch had last upgraded the rating from BB+ to BBB- with a stable outlook on August 1, 2006. It said India's ratings balance a strong medium-term growth outlook and relative external resilience stemming from strong foreign reserve buffers, against high public debt, a weak financial sector and some lagging structural factors. Meanwhile, Chief Economic Advisor Krishnamurthy Subramanian has said the government and the RBI will work together to ensure smooth implementation of the Supreme Court’s recent ruling on the central bank’s stressed assets circular but ruled out changes in the Insolvency and Bankruptcy Code (IBC) due to the ruling. There will be some buzz in the banking sector stocks with report that the RBI said it will hold further discussions with banks on linking interest rates on personal, home, auto and MSME loans with various benchmark rates, a move that would further delay issuance of final guidelines on the issue. Also, there will be some reaction in agriculture related stocks with report that India has issued a combined 650,000 tonne import quota for pulses for the fiscal year to March 2020, allowing overseas purchases of protein-rich pulse varieties that are a staple of Indian cuisine.

The US markets ended mostly higher on Thursday as investors watched for more details about a potential trade deal between China and the US, while there was some cautiousness ahead of US payrolls data. Asian markets are trading in green in thin trade on Friday, following gain on Wall Street, amid holiday in China and Hong Kong.

Back home, Indian equity bourses failed to take any sense of relief from the Reserve Bank of India’s (RBI) repo rate cut on Thursday, as Sensex and Nifty settled with losses of around 200 and 50 points, respectively. The RBI in its First Bi-Monthly Monetary Policy Statement, 2019-20, has cut the policy repo rate under the liquidity adjustment facility (LAF) ) by 25 basis points (bps) to 6.0% from 6.25% earlier for the second time in a row. After a cautious start, key indices remained lackluster throughout the session, amid a private report stating that Indian businesses are getting squeezed. As economic growth slows and inflation sinks they have little ability to raise prices without losing sales, and yet they are getting almost no relief from borrowing costs with lending rates remaining high. Adding more worries among traders, India’s services sector grew at slower pace, on the back of a slower expansion in new work. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index eased to 52 in March from 52.5 in February. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- also slipped to 52.7 in March as against 53.8 in February. The markets extended their losses in the second half of the session to settle in red territory, after RBI Governor Shaktikanta Das said that even though the headline credit demand is growing at a healthy 14 percent, it is not broadbased while those to MSMEs have been muted so far. Das further said the RBI will continue to watch macroeconomic factors and will act timely on the same. Market participants overlooked Commerce and Industry Minister Suresh Prabhu’s statement that India's exports are expected to reach $32.38 billion in March, the highest in any month so far, on account of healthy growth in sectors such as pharmaceuticals. He said that exports would cross $331 billion mark in the 2018-19 fiscal year. The street also paid no heed towards Vice President M Venkaiah Naidu’s statement India would continue to grow at a higher economic growth rate until 2021, while citing the World Bank estimates. World Bank estimates suggest that India would continue to grow at a high rate until 2021. Finally, the BSE Sensex declined 192.40 points or 0.49% to 38,684.72, while the CNX Nifty was down by 45.95 points or 0.39% to 11,598.00.