Markets likely to make cautious start on Thursday

Indian markets snapped two-day losing streak and ended volatile session in green territory on Wednesday with notable gains amid easing crude oil prices. Today, the markets are likely to make a cautious start amid mixed cues from global markets. Traders will be concerned with report that as against a steep 17.5 percent higher tax collection budgeted for the full year, the government could mop-up only 4.7 percent more so far this year, with the direct tax kitty growing to Rs 5.50 lakh crore as of September 17, up from Rs 5.25 lakh crore a year-ago. The lower mop-up reflects the deepening slump in demand and overall growth. Some cautiousness may also come as ahead of the crucial GST Council meeting on September 20, a committee of officials has rejected demands for a cut in tax rate on items ranging from biscuits to car owing to tight revenue position as any reduction will dent Centre and State collections. Traders may take note of the India Meteorological Department’s (IMD) report that monsoon rains in India in the week to September 18 were above average for a third straight week, with floods hitting many districts in the central parts of the country and damaging crops such as soybean and pulses. Though, some support may come later in the day with Niti Aayog CEO Amitabh Kant’s statement that the government is doing everything possible to turn around the Indian economy and bring it back to a high trajectory growth path. Some suprot may also come with Commerce and Industry Minister Piyush Goyal’s statement that huge export potential exists in chemical and allied sector and it should make a combined effort to set higher goals and aspire for extraordinary results. There will be some buzz in the steel stocks with ratings agency ICRA’s statement that India’s steel consumption growth is likely to decelerate to six per cent in the current financial year, due to the economic slowdown. However, the profitability of steelmakers may recover somewhat in the third quarter of 2019-20, with a sharp fall in prices of coking coal, key steel-making ingredient, in August 2019. Housing finance companies stocks will be in focus as after mandating banks to link their new retail loans to an external benchmark, the Reserve Bank is now looking at structuring the interest rate regime for housing finance companies and shadow bankers, which together control over a fifth of the credit market, for better transmission.

The US markets closed mostly higher Wednesday after the Federal Reserve cut its benchmark interest rate for a second time this year, citing slowing global economic growth and uncertainty over US trade conflicts. Asian markets are trading mixed as investors looking for the Bank of Japan (BoJ) to announce its interest rate decision and monetary policy statement later today. The BoJ is widely expected to maintain a pledge to guide short-term interest rates at -0.1%.

Back home, in a highly volatile session, Indian equity benchmarks managed to keep their heads above water in Wednesday’s trading session, with Sensex and Nifty closing higher by over 0.20% each. Key indices made a fabulous start of the day, amid reports that the finance ministry is working on one more booster dose to give a leg-up to the economy that has hit over six-year low of 5 per cent. However, soon volatility persisted over the markets, after global credit rating agency Moody's in its latest report said that reduction in the risk weight on consumer credit by the Reserve Bank of India is credit negative as it may lead to increased exposure by lenders to this loan segment. But, equity benchmarks managed to trade in green territory for the most part of the trading session to end higher, taking comfort with Principal Economic Adviser Sanjeev Sanyal’s statement that there is far more space on the monetary side than the fiscal front for lifting sagging economic growth. Some support also came with Minister of Commerce and Industry and Railways Piyush Goyal’s statement that government is planning to launch a National Logistics Policy to reduce trade costs. He added that all transport sectors of railways, civil aviation, roads and shipping would work towards bringing logistics costs below 10%. Finally, the BSE Sensex gained 82.79 points or 0.23% to 36,563.88, while the CNX Nifty was up by 23.05 points or 0.21% to 10,840.65.