Markets likely to make weak start on Tuesday

Indian markets ended lower with cut of over half a percent on Monday on surging crude oil prices, following the drone attack on Saudi oilfields, along with heavy selling in Energy, Auto, Bankex and Realty stocks. Today, the markets are likely to make weak start amid subdued global cues. Traders will be concerned with a private report indicating that lose-monetary policy alone cannot arrest the deepening slump, instead government must take demand-boosting measures, especially in rural areas, by frontloading expenditure primarily through the national rural employment scheme. It also warned that any attempt to trim government spending to maintain the fiscal numbers will be severely detrimental to growth. Investors will be reacting to the Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that India's current account and fiscal deficit could take a hit if oil prices continue to rise after an attack on Saudi Arabian oil facilities over the weekend. Also, there will be some cautiousness as Das expressed concern over the first quarter GDP numbers in the ongoing fiscal, which was pegged at 5 per cent, terming it as a surprise. However, the RBI governor said he was confident that the economy would recover following the host of measures undertaken by the government. Though, traders may take note of Commerce and Industry Minister Piyush Goyal’s statement that India and the US are in continuous dialogue and working towards early resolution of trade related issues. Some support may also come with a report that the government expects a 30% rise in export credit disbursals by the end of 2019-20 through greater insurance coverage of exporters and easier inspection norms. Meanwhile, in a relief to the farm sector, the government has decided not to levy 2 per cent tax deduction at source (TDS) on cash payments of over Rs 1 crore made through Agriculture Produce Market Committees (APMCs). There will be some reaction in aviation stocks with a private report indicating that domestic airlines may have to hike fares two weeks ahead of the busy travel season if oil prices remain elevated over next few days.

The US markets ended lower on Monday after a weekend attack on Saudi Arabia’s oil-production facilities unsettled global markets. Asian markets are trading mostly in red on Tuesday as investors assessed heightened geopolitical risks in the aftermath of the strike on Saudi Arabia’s crude production.

Back home, Indian equity markets remained under the grip of bears on Monday, with Sensex & Nifty closing lower by over 250 & 50 points, respectively. The markets made a weak start of the day, impacted by the commerce ministry’s data report showing that India's exports dropped by 6.05 per cent to $26.13 billion in August compared to the year-ago month. Imports too declined by 13.45 per cent to $39.58 billion, narrowing trade deficit to $13.45 billion in August. Anxiety also remained among traders, amid SBI report stating that the contemporary issue for macroeconomists is to exclusively focus on assuring adequate aggregate demand as the current slowdown cannot be tackled by monetary policy in isolation. Weak trade persisted on the street in the second half of the trading session, as investments through participatory notes (P-notes) in the Indian capital market stood at Rs 79,088 crore in August-end, registering the third consecutive month-on-month decline. Investments through P-notes has been declining since June, while the month of May had registered an increase over the previous month. Market participants took a note of report that India’s Wholesale price index (WPI) inflation remained unchanged at 1.08% in the month of August 2019, as compared to July 2019 and 4.62% during the corresponding month of the previous year. Finally, the BSE Sensex lost 261.68 points or 0.70% to 37,123.31, while the CNX Nifty was down by 72.40 points or 0.65% to 11,003.50.