Benchmarks likely to make negative start on Friday

Indian markets ended the F&O expiry session on positive note, riding on optimism of a likely US-China trade deal and softening crude oil prices. Today, the markets are likely to make negative start amid weak global cues. There will be some cautiousness with Fitch Ratings’ statement that the steep cut in tax paid by companies may stimulate investments and economic growth only in the medium term, but it will lead to breach fiscal targets in the current fiscal itself. It expects India to miss its fiscal deficit target of 3.3% of GDP for the current financial year by about 40 basis points following last week's decision to reduce corporate tax rates, resulting in the loss of an estimated Rs 1.45 trillion in tax revenue. Though, some support may come later in the day on report that Union Finance Minister Nirmala hoped the economy will start looking up in the second half of the current financial year as consumption rises and banks increase their lending operations. She also said private sector banks were not facing any liquidity crisis while exuding confidence that demand would return and motivate the economy to move at a faster rate. Meanwhile, a panel set up by the Reserve Bank of India (RBI) has recommended that the central bank’s liquidity framework be made flexible enough to adapt to conditions when the system requires liquidity to be in surplus mode. Under the current setup, system liquidity is required to be in a small deficit, which could be an impediment when surplus liquidity is essential. There will be some buzz in the telecom stocks with ICRA’s statement that after scaling a high propelled by 4G network expansion, the capex intensity of the telecom industry is expected to witness moderation till the point there is technology upgrade to 5G, which is still some time away. Banking stocks will be in focus with the RBI’s data showing that bank credit and deposits grew at 10.26% and 10.02% to Rs 97.01 lakh crore and Rs 127.22 lakh crore, respectively, in the fortnight ended September 13.

The US markets ended in red on Thursday as traders monitored the latest trade developments and assessed a whistleblower complaint against President Donald Trump that was released. Asian markets are trading lower on Friday as the release of a whistleblower complaint against US President Donald Trump heightened uncertainties about the global economy, already reeling from Sino-US trade war.

Back home, Indian equity bourses gained momentum on Thursday to settle in green terrain. Key indices started on a positive note, after the Employees' State Insurance Corporation (ESIC) in its latest payroll report showed that around 14.24 lakh jobs were created in July 2019, higher than 12.49 lakh in the previous month. Adding more relief, Union minister Som Parkash said that the Centre is determined to bring economic growth to 7-8% at the earliest, asserting that the government has taken many steps to boost the economy. Separately, the SEBI eased the regulatory framework for foreign portfolio investors (FPIs) and simplified KYC requirements for them and permitted them to carry out off-market transfer of securities. Key benchmarks remained positive throughout the trading day, amid a private report stating that the Indian economy is expected to start its recovery from later part of this fiscal thanks to the initiatives taken by the Reserve Bank for policy rate transmission and steps by the government to boost growth. Domestic sentiments also remained in optimistic mood, even though the United Nations Conference on Trade and Development (UNCTAD) in its Trade and Development 2019 report projected India’s gross domestic product (GDP) growth at 6% for 2019 from 7.4% in 2018. It said slowdown in growth rate is attributed to a sharp fall to 5.8% in the first quarter of 2019. Finally, the BSE Sensex gained 396.22 points or 1.03% to 38,989.74, while the CNX Nifty was up by 131.00 points or 1.15% to 11,571.20.