Benchmarks likely to make optimistic start on Wednesday

Indian markets extended their gains for third consecutive session and ended in green on Tuesday led by gains in auto, financial and FMCG stocks. Today, the markets are likely to make positive start following firm global cues coupled with falling oil prices and hopes of more interest rate cuts by the Reserve Bank of India (RBI). A private report stated that the RBI will continue to be accommodative and deliver one more rate cut in the December policy review despite the surprising spike in headline inflation for September. However, there may be some cautiousness as the International Monetary Fund (IMF) slashed India’s GDP growth projection for the year 2019 to 6.1%, which is 1.2% down from its April projections and noted that the Indian economy is expected to pick up the next year at 7.0 % in 2020. Traders may be concerned with government data showing that India's exports contracted by 6.57% to $26 billion in September mainly due to significant dip in shipments from key sectors such as petroleum, engineering, leather, chemicals, and gems & jewellery. Imports too declined by 13.85% to $36.89 billion, narrowing trade deficit to $10.86 billion in September. There will be some buzz in the auto stocks with Ind-Ra’s report that the much-awaited vehicle scrappage policy, which is under consideration of the Cabinet, is unlikely to help revive demand for new commercial vehicles (CVs) in the short-term, though used CVs sale may see an improvement. Aviation stocks will be in focus with Icra’s report that Indian airlines international air passenger traffic degrew 8.2% in August as against a 3.9% growth in the domestic volume in the same month, with market share declining to 34.2% in the month due to under-performance. There will be some reaction in services industry stocks with the RBI’s data showing that India’s services exports rose by 10.4% to $18.24 billion in August in the current financial year. Also, there will be some buzz in the port stocks with Union Minister Mansukh Mandaviya’s statement that the government will put in place a comprehensive Port Grid and Port Development plan in six months for 204 minor ports in the country to boost coastal shipping and inland waterways, and bring a Bill in Parliament to provide a fillip to major ports. There will be some result announcements to keep the markets in action.

The US markets ended higher on Tuesday on strong US corporate results and a possible deal to avoid a disorderly British exit from the European Union. Asian markets are trading in green on Wednesday as Britain and the EU made headway on a Brexit deal ahead of a leaders’ summit though it remained unclear if London could avoid postponing its scheduled departure on October 31.

Back home, Indian equity benchmarks settled higher for third straight session on Tuesday, despite mixed cues from global markets. The start of the day was firm, aided by Minister of State for Finance Anurag Thakur’s statement that Indian economy is structurally and fundamentally very strong and the current slowdown, which is cyclical in nature, would not affect it much. He also exuded confidence that India would achieve the target of becoming $5 trillion economy by 2024-25. Market participants also took a note of the Finance Ministry’s statement that loans worth Rs 81,781 crore were disbursed during the nine-day outreach programme or loan mela organized by banks that began on October 1. Bourses extended their gains in the second half of trading session, taking support with Commerce and Industry Minister Piyush Goyal’s statement that the recent economic slowdown is a cyclic structural adjustment, and it is the right time to invest in India before growth bounces back. The street overlooked report that the Consumer Price Index (CPI) based inflation jumped to a 14-month high of 3.99% in September as compared to 3.28% in August and 3.70% in the September last year, rising for the second straight month, due to costlier vegetables and pulses. The previous high was 4.17% in July 2018. Though, it still remained within the Reserve Bank of India’s target range of 4%, with deviation of 2% on either side. Finally, the BSE Sensex gained 291.62 points or 0.76% to 38,506.09, while the CNX Nifty was up by 87.15 points or 0.77% to 11,428.30.