Markets likely to make slightly negative start

Indian markets ended choppy trading session slightly in red on Tuesday amid concerns the government will have a tough job maintaining its fiscal deficit target for the year. Today, the markets are likely to make slightly negative start tacking weakness in Asian peers and continued rise in crude oil prices. There will be some cautiousness with a private report that the government may discontinue spending on 200-odd schemes in order to stick to its fiscal deficit target of 3.3 percent. However, some respite may come later in the day with Finance minister Nirmala Sitharaman’s statement that the government will soon use its strong electoral mandate to usher in the next wave of reforms, and not to miss the bus this time. Meanwhile, the Securities and Exchange Board of India (SEBI) has issued operational guidelines for foreign portfolio investors (FPI) regulations notified in September. The regulator said that all existing FPIs registered as category III FPIs under the 2014 regulations shall be deemed to have been registered as Category II FPIs under the new regulations. Besides, the base year for gross domestic product, or GDP, will be revised in few months to capture the changing economic scenarios in India and abroad. There will be some buzz in the reality stocks with Finance Minister Nirmala Sitharaman’s statement that the government and Reserve Bank are working to resolve the issues being faced by realty sector. Textile stocks will be in focus as ICRA maintained a negative outlook on the domestic cotton with pressures building up on credit profiles of domestic cotton spinners as they continue to grapple with challenges on the demand front. There will be some reaction in Jewelry stocks with the World Gold Council’s (WGC) statement that India's gold demand is expected to fall to its lowest level in three years in 2019, as domestic prices climb to a record against a backdrop of falling earnings in rural areas, a key source of custom for the precious metal. Also, sugar stocks will be in limelight as the government announced that a environmental clearance would not be required to produce additional ethanol from sugarcane juice as it does not cause pollution, a move that may benefit farmers and the cash-strapped sugar mills.

The US markets ended mostly in green on Tuesday amid continued optimism about a potential U.S.-China trade deal. Asian markets are trading mostly lower on Wednesday as investors awaited new developments toward scaling back a bruising trade war between the United States and China.

Back home, Indian equity bourses paused gaining rally on Tuesday, with Sensex & Nifty losing around 50 and 25 points, respectively. After firm start, key indices soon turned volatile, impacted by SBI’s report stating that India's Gross Domestic Product growth is likely to slow further in the July-September quarter of this financial year to below 5 per cent amid decline in consumption, weak investments and an under-performing service sector. Adding more worries, ICRA said bank credit growth is likely to slow down sharply to 8-8.5 percent during current financial year as compared to 13.3 percent in FY19, mainly due to decline in incremental credit in the first half of FY20. Bourses extended their losses in noon deals, after India’s services sector activity contracted for second straight month in October. The seasonally adjusted Nikkei Services Business Activity Index stood at 49.2 in October from 48.7 in September. Some concerns also came with reports that the CBI is conducting searches in 169 locations across the country in connection with 35 bank fraud cases registered by the agency involving funds of over Rs 7,000 crore. However, in last leg of the trade, indices came off their day’s low points, amid report that India is expected to see M&A deals of over $52 billion in 2019 as mergers and acquisitions in the country are expected to remain stable despite global headwinds. Finally, the BSE Sensex lost 53.73 points or 0.13% to 40,248.23, while the CNX Nifty was down by 24.10 points or 0.20% to 11,917.20.