Benchmarks likely to make cautious start on Friday

Indian markets tumbled around 2 percent each on Thursday amid weak global cues and the monthly derivative contracts expiry. Today, markets are likely to start the session on a cautious note, a day after the headline indices suffered their worst loss in six months, amid mixed global cues. Traders will be taking encouragement as painting a rosy picture of the economy, the city-based thinktank NCAER said that most of the sectors are on their way to reach pre-pandemic levels and surpass them. The National Council for Applied Economic Research (NCAER) said in its monthly review of the economy said the economic news has been favourable on balance, on account of better than projected fiscal outcomes, a rebound in most high-frequency indicators, and another impetus to policy reform, including a hitherto inconceivable privatisation of Air India. Some support will come as SBI Research in its report stated that the RBI should let the rupee rally against the dollar to contain imported inflation coming in mainly from crude prices and help push exports, as the current account risks from rising oil price can be contained at 1.4 per cent of GDP. Besides, the finance ministry has given its go ahead to 8.5% rate of interest on provident fund deposit for 2020-21 paving way for the Employees' Provident Fund Organisation to credit the interest in accounts of over 60 million beneficiaries. Meanwhile, the government has released a balance amount of Rs 40,000 crore to states and union territories (UTs) with legislature under the back-to-back loan facility in-lieu of GST compensation. However, some cautiousness may come as the Centre extended the nationwide Covid-19 containment measures till November 30 as there has been localised spread of the virus in a few states and the disease continues to be a public health challenge in the country. Gold and jewelry industry stocks will be in focus as the World Gold Council said in a report India’s gold demand has seen a 47 per cent year-on-year jump in the July-September quarter to 139.1 tonnes, following strong rebound in economic activity and recovering consumer demand. There will be some important earnings announcements too to keep the markets buzzing.

The US markets ended higher on Thursday as solid results from Caterpillar and Merck helped investors shrug off signs of slowing economic growth. Asian markets are trading mostly in red on Friday despite record highs on Wall Street overnight.

Back home, Indian equity benchmarks witnessed a sharp decline and lost nearly two percent in the session, amid heavy broad-based sell-off. Volatility prevailed as traders rushed to square off their positions ahead of the expiry of monthly derivatives contracts due by the end of the session. Traders were anxious with report that cooking gas LPG prices may be hiked next week after under-recovery on the fuel widened to over Rs 100 per cylinder. Some concern also came with a report from the Euro-Mediterranean Center on Climate Change (CMCC) said that in India, the decline in rice and wheat yields due to climate change could lead to economic losses between 43-81 billion EUR (or 1.8-3.4% of GDP) by 2050. Traders were also concerned as foreign Institutional Investors stood as net sellers in the capital market as they offloaded shares worth Rs 1,913.36 crore on Wednesday, exchange data showed. Market participants overlooked a private report stated that amidst the continuing market rally, the value of the foreign portfolio investors' holdings in the domestic equities jumped by $112 billion to $667 billion between April 1 and September 30, 2021, even though they have been getting increasingly jittery about the highly stretched valuations. Traders also paid no heed towards RBI report showing that the country's foreign exchange reserves surged by $58.38 billion in April-September 2021 to $635.36 billion. The forex reserves were at $576.98 billion at end-March 2021. Meanwhile, the Central Board of Direct Taxes (CBDT) stated that refunds of over Rs 1,02,952 crore have been issued to the taxpayers during the current financial year. The CBDT frames policy for the Income Tax Department. Finally, the BSE Sensex declined 1158.63 points or 1.89% to 59,984.70 and the CNX Nifty was down by 353.70 points or 1.94% to 17,857.25.