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Domestic Market View
Markets to make gap-down opening on Thursday
Indian markets ended lower for second straight session on Wednesday, with Sensex and Nifty settling below their crucial 35,900 and 10,800 levels, respectively, amid weak global cues. Besides, the Reserve Bank of India (RBI) kept its key policy rate unchanged, maintaining status quot. Today, the markets are likely to make a gap-down opening tracking weakness in other Asian counterparts amid growing uncertainty about the global economy. Investors will be looking ahead for cues from a closely watched the Organization of the Petroleum Exporting Countries (OPEC) meeting and the outcome of assembly elections in five states.
However, traders may take some support with the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) cutting H2FY19 inflation forecast to 2.7-3.2 percent from 3.9-4.5 percent earlier. It pegged H1 FY20 inflation at 3.8-4.2 percent. Moreover, Deputy Governor Viral Acharya said there is more than enough liquidity in the system at the moment, but the Reserve Bank of India will step in as a lender of last resort if necessary. Besides, the RBI has retained its Gross Domestic Product (GDP) forecast for the current fiscal at 7.4 percent and said growth will accelerate further to 7.5 percent in first half of 2019-20, driven by acceleration in investment activity.
Meanwhile, the Union Cabinet is expected to approve a policy to boost exports of agriculture commodities such as tea, coffee and rice and increase the country's share in global agri trade. The proposed policy would focus on all aspects of agricultural exports including modernising infrastructure, standardisation of products, streamlining regulations, curtailing knee-jerk decisions, and focusing on research and development activities. There will be some buzz in the port sector stocks with report that rating agency ICRA maintained stable year-end outlook for the port sector, terming rebound in coal volumes and steady progress on the Sagarmala project positive for Indian port sector players in the medium term.
RBI’s policy decision fails to provide any relief to equity markets
Indian equity markets failed to take any sense of relief with the Reserve Bank of India’s (RBI) policy decision to keep the repo rate unchanged on Wednesday, as both Sensex and Nifty ended in red, breaching their crucial psychological level of 35,900 and 10,800 respectively. The RBI on expected lines kept the repo rate unchanged at 6.50%, taking into account easing global crude prices, benign inflation and moderation in economic growth. The start of the day was pessimistic, as the trade was impacted by Niti Aayog Vice Chairman Rajiv Kumar’s statement that the country’s economy is likely to bounce back during the fourth quarter at a faster rate to match the overall projection for the current fiscal, but, he added that the economy is unlikely to recover in the third quarter from the slow pace during the last quarter. Traders reacted negatively to the private report showing that the sudden move to demonetise a bulk of Indian currency in circulation and the deteriorating agrarian distress in the country have exposed the consequences of financial exclusion. Some worries also came with another private report stating that listed companies accounted for a little less than a third of the corporate tax in FY18, down from nearly 40% in FY17 and 49% a decade ago.
However, fall in the markets remained restricted, after India’s services sector activity strengthen further in month of November, amid an upsurge in demand. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index rose to 53.7 in November from 52.2 in October. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too improved to 54.5 in November from 53.0 in October. Adding some relief, Engineering Export Promotion Council (EEPC) said that India’s engineering exports are likely to touch $80 billion this fiscal on account of healthy growth in key markets, including the US and Europe. Some support also came with Economic Affairs Secretary Subhash Chandra Garg’s statement that the PMI data for November shows overall strong increase in business activity as well as demand and should augur well for economic growth in October-December quarter. Meanwhile, SBI research report stated that incremental credit to micro and small enterprises (MSEs) has increased five times to Rs 1.23 lakh crore compared to Rs 25,700 crore during corresponding period pre-GST.
On the sectoral front, realty stocks ended lower, despite Crisil Ratings’ latest report indicating that residential real estate demand may pick up in the medium-term following improvement in end-user participation on rising affordability, increasing launch of units with mid-income ticket sizes and implementation of RERA. Sugar stocks also plunged, amid a private report stating that Indian sugar mills have 39.73 lakh tonnes of sugar till November 30, which is almost similar to the sugar production of 39.14 lakh tonnes during same period of previous year.
Global Market Overview
Asian markets end in red on Wednesday
Asian markets ended lower on Wednesday amid concerns over trade and worrying signals of economic health after the difference between three- and five-year US Treasury yields dropped below zero. Traders were skeptical around the Trump-Xi agreement announced over the weekend. In China, traders paid little attention to encouraging services data. The services sector in China continued to expand in November, and at an accelerated rate, the latest survey from Caixin revealed with a PMI score of 53.8. That beat expectations for 50.8, which would have been unchanged from the October reading. While, the latest survey from Nikkei showed that the services sector in Japan continued to expand in November, albeit at a fractionally slower pace with a PMI score of 52.3, down from 52.4 in October. Chinese shares ended lower as investor doubts mounted over whether China and the United States will be able to settle their trade dispute before the 90-day deadline expires, and as new data showed a worsening business outlook. Further, Japanese shares fell after a plunge on Wall Street overnight on growth and trade concerns.
US markets remain close for former President Bush's Funeral
The US markets were closed on Wednesday for former President Bush's Funeral.
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