Markets likely to make negative start on Thursday

Indian markets extended their gains for third straight session on Wednesday led by banking, IT and FMCG stocks amid fall in crude oil prices. Today, the markets are likely to make a negative start tracking weak global cues. There will be some cautiousness with the International Monetary Fund’s statement that the US dollar was overvalued by 6% to 12%, based on near-term economic fundamentals, while the euro, Japan's yen and China's yuan were seen as broadly in line with fundamentals. It added that the dollar is overvalued is likely to give Trump more fodder for his frequent complaints that dollar strength is hampering US exports. However, some support may come later in the day with a private report that budget proposals to address the country's free-float problem can result in inflows of $25 billion. Finance minister Nirmala Sitharaman's proposals include hiking the cap on foreign portfolio investors from 24 percent in companies to get them on par with the sectoral FDI limits and increasing the minimum public holding to 35 percent from the present 25 percent. Traders may also take note of NITI Aayog CEO Amitabh Kant’s statement that India needs to grow at the rate of 9-10 percent to lift the majority of the population above the poverty line and this growth will not be possible unless entrepreneurship in the country gets a massive boost. Meanwhile, the Cabinet has approved seven amendments to the Insolvency and Bankruptcy Code (IBC) to enforce strict timelines for the rescue of companies. The amendments are aimed at filling the critical gaps in the corporate rescue framework specified in the Code. There will be some buzz in the fast moving consumer goods (FMCG) stocks as a private research firm lowered its growth target for the FMCG sector. The firm has estimated growth in 2019 to be in the 9-10 percent range as against 11-12 percent estimated earlier. There will be some reaction in sugar stocks with report that the government has permitted export of 1,239 tonnes raw sugar under its tariff-rate quota (TRQ) to the US, which enables shipments to enjoy relatively low tariff. There will be lots of earnings reaction based on the performance of the companies to keep the markets buzzing.

The US markets ended lower on Wednesday as weak results from CSX Corp stoked concerns that the protracted trade war between the US and China could hurt corporate earnings. Asian markets are trading in red in early deals on Thursday mirroring overnight fall on Wall Street.

Back home, Indian equity bourses gained for the third straight session and ended the trading session in green terrain on Wednesday. Markets started on cautious note but soon gained momentum, after the Trump administration said that there is an enormous potential for growth in the India-US relationship, exuding confidence that the ongoing trade negotiations could be worked through because of the friendship between the two nations. Adding more comfort, Indian Ambassador to the US, Harsh Vardhan Shringla also said that it is in the mutual interest of India and the US to have a smooth trading relationship and they can find ways to deal with some of the minor speed bumps. Key indices managed to hold their heads in green territory during the whole day, despite mixed cues from global markets. The street remained positive with Finance Minister Nirmala Sitharaman’s statement that total bad loans of commercial banks declined by Rs 1.02 lakh crore to Rs 9.34 lakh crore in the 2018-19 fiscal on the back of steps taken by the government. However, gains remain capped on the back of Chief Economic Advisor K V Subramanian’s statement that there is a need to tap foreign capital to accelerate growth from the current level of 7 per cent to 8 per cent. He added that achieving $5-trillion economy by 2024-25 is possible although the goal is slightly stretched. Finally, the BSE Sensex gained 84.60 points or 0.22% to 39,215.64, while the CNX Nifty was up by 24.90 points or 0.21% to 11,687.50.