Indian markets settled higher on Tuesday on report that government will soon hold discussions with representatives of foreign portfolio investors, amid continuing overseas fund outflow from the markets following the decision to impose surcharge on certain class of such investors. Today, the markets are likely to make a negative start amid weakness in Asian peers. Some cautiousness will come with economic think-tank NCAER’s statement that India's GDP growth is likely to be 6.2 per cent during the current fiscal, down from 6.8 per cent in 2018-19, on account of flat growth in agriculture sector. The prospects for agricultural sector in 2019-20 depend largely on the south-west monsoon. It added that the country as a whole has received 7 per cent below normal rainfall by August 5, 2019. It has also experienced temporal variations in rainfall. Traders will be looking ahead to the outcome of the Reserve Bank of India’s (RBI) third bi-monthly policy of the ongoing fiscal later in the day. With inflation under control, there are expectations of another 25 basis points rate cut by the RBI for a fourth time in a row to boost economic activities. Traders may take note of Former RBI Governor Bimal Jalan’s statement that the government should borrow only long-term fund from the overseas market, and the quantum should not exceed 1.5% of GDP under any circumstances. Jalan said that he does not have negative view about overseas sovereign borrowing, but he thinks India does not need to borrow from abroad. Meanwhile, amid concerns over banks citing 'client confidentiality' to resist sharing of information on delayed loan repayments and possible defaults by their borrowers, capital market regulator SEBI is planning to tighten its norms to make it mandatory for companies to provide these details to credit rating agencies. There will be some reaction in tyre stocks with ratings agency Icra’s statement that demand slowdown will curtail tyre industry's revenue growth to 3-4 per cent in 2019-20, and margins are expected to decline. It also said the credit profile of Indian tyre industry is likely to weaken in FY2020 affected by the ongoing slowdown in domestic automotive industry, rising raw material (RM) prices and higher spend towards debt-funded capacity expansion. There will be also some buzz in the aviation stocks with report that Aviation regulator DGCA has directed all airport operators to carry out compulsory periodic inspection of runway surface. There will be some earnings announcements too to keep the markets buzzing.
The US markets ended higher on Tuesday after China backed off from a further escalation in the country’s trade and currency dispute with Washington. Asian markets are trading mostly lower on Wednesday as investors waited for the People's Bank of China to set its daily midpoint fix for the Chinese yuan.
Back home, Tuesday brought positive vibes for Indian equity markets, with Sensex and Nifty closing higher by around 0.75% each. Key indices made a cautious start but soon gained momentum, aided with Finance Minister Nirmala Sitharaman’s statement that the government planned steps to improve the state of the economy fairly quickly after getting inputs from business leaders. Traders took a note of a report that India's economy needs external capital flow to grow at nine per cent and touch $5 trillion in the next five years. It also said that one of the positive thing in India is the monsoon is good and expecting rural economy to pick up and therefore slowly the country will see economy coming back to normalcy. Benchmarks extended their gains in late afternoon session to trade near their intraday high points, on account of positive European markets. The street remained optimistic, as the ASSOCHAM expects the Reserve Bank of India (RBI) to cut the benchmark policy Repo rate by 50 basis points or more, in the wake of a realistic assessment of the state of economy which needs an immediate demand push and investment support by way of reduced cost of borrowing. Meanwhile, the finance ministry has said that banks have agreed to take measures as per RBI guidelines to review their lending rates as they have not commensurately transmitted to borrowers benefits of reduction in the policy rate by the RBI. Finally, the BSE Sensex gained 277.01 points or 0.75% to 36,976.85, while the CNX Nifty was up by 85.65 points or 0.79% to 10,948.25.
