Markets likely to make negative start on Wednesday

Indian equity markets closed in the red on Tuesday amid volatility, dragged by banking, metal, pharma and oil & gas stocks. Today, markets are likely to make negative start tracking weakness across other Asian markets despite overnight gains on Wall Street. There will be cautiousness as Fitch Ratings kept India's sovereign rating unchanged at 'BBB-' with a negative outlook, and said that the rating balances a still-strong medium-term growth outlook and external resilience from solid foreign-reserve buffers against high public debt, a weak financial sector and some lagging structural issues. It said the country’s rapid economic recovery from the Covid-19 pandemic and easing financial sector pressures are narrowing risks to the medium-term growth outlook. Though, the negative outlook on the rating reflects lingering uncertainty around the medium-term debt trajectory, particularly given India's limited fiscal headroom relative to rating peers. However, some respite may come later in the day as a private report stated that private equity (PE) and venture capital (VC) investments touched an all-time high of USD 12.9 billion in October, on the back of high-value deals. The investments were 71 per cent higher as compared with October 2020’s USD 7.5 billion and 2.5 times the USD 5.2 billion value recorded in September this year. Some support may come with Commerce and industry minister Piyush Goyal stating that India attracted record foreign direct investment over the last several years and the trend is expected to continue, considering the major structural reforms being undertaken by the government. Meanwhile, Member of Commission of India Sangeeta Verma has said the Indian competition law is broad enough to deal with new-age competition concerns in digital markets. She added that the Indian law has extra-territorial jurisdiction and can deal with market practices anywhere in the world if it has anti-competitive effects in India. She noted there exists a bargaining power imbalance between digital platforms and business suppliers in digital markets. There will some action in Gem and Jewellery stocks as Gem and Jewellery Export Promotion Council (GJEPC) has said the gem and jewellery exports witnessed a growth of 45.2 per cent during October at Rs 31,241.09 crore (USD 4,170.59 million) compared to the same month last year due to strong demand from key markets, led by the US. There may be some buzz in banking sector stocks as Reserve Bank Governor Shaktikanta Das asked banks to be investment-ready when the private Capex cycle picks up, as the pandemic-battered economy is on a strong recovery path that will demand huge investments to sustain in the long run. Crediting the faster-than-expected recovery primarily to the improved vaccination pace and the resultant steady fall in the infection caseload, Das said this has led not only to lower extreme health outcomes like mortality/ hospitalisation but also boosted consumer confidence, which was visible in the festival demand.

The US markets ended higher on Tuesday after positive retail data. Commerce Department report showed retail sales shot up by more than expected in the month of October. The report said retail sales spiked by 1.7 percent in October after climbing by an upwardly revised 0.8 percent in September. Asian markets are trading lower in early deals on Wednesday despite positive cues from US markets. 

Bank home, Indian equity benchmarks edged lower in a volatile session on Tuesday despite stable global cues. Weakness in heavyweights from the sectors like Energy, PSU, Oil & Gas and Banking dragged the benchmarks lower. Key indices started in the negative territory, as traders got anxious with Finance Secretary T V Somanathan’s statement that the entire revenue loss on account of reduction in excise duty on petrol and diesel by Rs 10 and Rs 5 a litre respectively will be borne by the Centre. Some concern also came as All India Financial Institutions (AIFI) said that with the ripple down effect of declining automobile sales, the forging industry is facing the heat with a sharp decline in demand which has resulted in substantial production cuts.  However, key indices recouped most of their losses in afternoon session, taking support from data showing that merchandise exports grew for the eleventh consecutive month to $35.65 billion, up 43 per cent on-year in October, as external demand continued to remain robust. The preliminary data released by the commerce and industry ministry showed growth being driven by higher demand for items, primarily engineering goods, petroleum products, gems and jewellery, as well as organic and inorganic chemicals, among other items.  Some support also came as the Reserve Bank of India (RBI) in its article on the state of the economy has stated that the Indian economy is on the path of a durable recovery on the back of conducive monetary and credit conditions, the global headwinds notwithstanding. Finally, the BSE Sensex fell 396.34 points or 0.65% to 60,322.37 and the CNX Nifty was down by 110.25 points or 0.61% to 17,999.20.