Markets likely to get cautious start after weak trade data

Indian markets ended lower on Wednesday on the emergence of selling mainly in banking stocks. Today, the markets are likely to get a cautious start after data showed India's merchandise exports fell for the fifth straight month. The commerce and industry ministry data showed that exports contracted by 1.8% in December 2019 to $27.36 billion, as processed petroleum exports saw lower receipts and broad-based decline continued to plague all major foreign exchange earning sectors. Imports too declined by 8.83% $38.61 billion, bringing down the trade deficit to $11.25 billion during the month under review. Also, traders will be concerned with Former finance secretary Subhash Garg’s statement that India's real fiscal deficit in FY20 is likely to be higher at 4.5-5% of GDP due to an expected shortfall in revenue, and higher spending. Though, some support may come later in the day with NITI Aayog vice chairman Rajiv Kumar’s statement that the government is likely to take more measures to deal with the problem of financial sector. Meanwhile, concerned over rise in imports in the others category, Commerce and Industry Minister Piyush Goyal asked those importers to seek HSN or tariff code within 30 days from the foreign trade office, failing which the government would impose strong restrictions on their inbound shipments. There will be some buzz in the jewellery stocks as gems and jewellery industry sought a reduction in import duty on gold to 6% and on cut and polished diamonds to 2.5% to revive the sector. Infrastructure stocks will be in focus with report that the allocation for the highway sector is likely to be raised by Rs 8,000-10,000 crore in the upcoming Budget. There will be some reaction in sugar stocks with a private report that the improvement in average sugar prices by close to Rs 2/kg to Rs 32.5-33.0/kg in 9M FY2020 yoy, along with the non-increase in the cane price for sugar season, SY2020 is expected to support the profitability of the sugar mills in the near term. There will be some result reactions too, to keep the markets in action.

The US markets ended in green on Wednesday, after President Donald Trump signed the first phase of a trade pact with China. Asian markets are trading mostly higher on Thursday after the US and China ended some uncertainties for the world economy by signing a partial trade agreement.

Back home, Indian equity bourses failed to carry on two-day record-closing streak on Wednesday, with Sensex & Nifty ending lower by around 80 & 20 points, respectively. After a weak start, indices remained under the grip of bears throughout the day, amid a private report that a spike in India's retail inflation in December has raised the chances that the Reserve Bank of India will put rate cuts on hold for some time despite economic growth languishing at more than six-year lows. Adding worries among traders, the bilateral trade between India and China declined by about $3 billion last year while India's trade deficit continues to be high amounting to $56.77 billion as both countries experienced an economic slowdown. In the last leg of the trade, key indices managed to come off their intraday low points, after the Asian Development Bank’s (ADB) report indicated that sound economic policies and strong institutions have transformed Asia and the Pacific over the past five decades into a center of global dynamism. Developing Asia's share of global gross domestic product (GDP) rose from 4% in 1960 to 24% in 2018. Investors were seen taking a note of a report stating that new FICCI President Sangita Reddy has urged the government not to worry too much about the fiscal deficit and try to pump the economy by increasing investments to arrest slowdown and accelerate growth. Finally, the BSE Sensex lost 79.90 points or 0.19% to 41,872.73, while the CNX Nifty was down by 19.00 points or 0.15% to 12,343.30.