Markets to make a cautious start of the new week

Indian equity markets snapped their three-session losing streak on Friday to end at a gain of one percent as investors bought into banking, energy and auto stocks. Today, the start is likely to remain cautious following weak cues in other Asian trade. Traders will remain concern on report that the Reserve Bank of India has flagged falling government revenue as a threat to the overall fiscal numbers -- with tax and non-tax revenues lagging way behind targets -- saying this along with weaker private consumption and investment could prove to be a challenge. Trades may take note with Commerce Secretary Anup Wadhawan’s statement that the continuous contraction in India's exports is likely to stop next year but the rate of growth will be subdued on account of the uncertain global trade situation due to rising protectionism. Also, Niti Aayog distinguished fellow Ramgopal Agarwala said the country’s economy is going through a difficult situation but not in a crisis. The reforms like demonetisation, Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC) were required but hastily implemented. However, traders may get some support with industry body CII’s statement that India's economy is expected to rebound in 2020 on the back of measures taken by the government and the RBI coupled with easing of global trade tensions. Meanwhile, the Reserve Bank of India (RBI) in latest data has stated that the country’s foreign exchange reserves increased by $456 million to a fresh lifetime high of $454.948 billion in the week to December 20. In the previous week, the reserves had swelled by $1.070 billion to $454.492 billion. In the reporting week, the rise in reserves was mainly on account of an increase in foreign currency assets, a major component of the overall reserves, which surged by $311 million to $422.732 billion. There will be some reaction in non-banking financial companies (NBFCs) stocks as RBI in its Financial Stability Report has said that Non-bank lenders witnessed stress in their asset quality in the first half of the current fiscal, with gross NPA ratio increasing to 6.3 per cent in September 2019 from 6.1 per cent in March. However, the net NPA ratio of NBFCs remained steady at 3.4 per cent between end-March 2019 and end-September 2019.

The US markets ended mixed on Friday as many traders remained away from their desks following Christmas. Asian markets were trading lower on Monday from the highest level in a year and a half, with few financial-market catalysts going into the year-end.

Back home, after 3 days of poor run, Indian equity bourses resumed their gaining rally on Friday, with Sensex & Nifty rising around a percent each. Indices made a firm start, as Reserve Bank announced simultaneous purchase and sale of government securities through special open market operations for Rs 10,000 crore each on December 30 following a review of liquidity situation. Adding some relief, ICRA said that aided by better recoveries and declining slippages, overall net non-performing assets (NPAs) of the banking sector are likely to improve to 3.2-3.3 per cent by the end this fiscal from 3.7 per cent in September 2019. Bulls held their tight grip on the Dalal Street in the second half of the trading session, on account of positive cues from the global markets. Market participants remained positive with Food & Agriculture Organisation’s (FAO) latest data showing  that select agri and agri-based commodities such as meat, milk and fruits, among others, present export opportunity worth over $97 billion (about Rs 6.9 lakh crore) for India. The street paid no heed towards a private report indicating that the government could miss its FY20 divestment target by as much as Rs 50,000 crore. Finally, the BSE Sensex gained 411.38 points or 1.00% to 41,575.14, while the CNX Nifty was up by 119.25 points or 0.98% to 12,245.80.