IGI Logo

Indian markets ended significantly lower on Wednesday, after the RBI's out-of-cycle policy action, amid an across-the-board sell-off. Today, the start of session is likely to be strong tracking upbeat cues from global peers.  Traders will be getting encouragement with the commerce ministry’s statement that India’s services exports set a new record of $254.4 billion (about Rs 19 lakh crore) in 2021-2022. It said the exports also hit an all-time monthly high of $26.9 billion in March. It added that telecommunications, computer, and information services, other business services and transport are the top contributors to the exports. Some support will come as Reserve Bank Governor Shaktikanta Das said recent trade agreements and geopolitical conditions open up potential market opportunities for India. Observing that India’s external sector has remained resilient amidst formidable global headwinds, he said provisional data suggest that merchandise exports remained strong in April 2022 and services exports reached a new high in March 2022. Traders may take note of Chief Economic Adviser V Anantha Nageswaran’s statement that India’s growth is expected to be in the range of 7-8.5 per cent given the global uncertainties. However, there may be some cautiousness as a report by ratings agency CRISIL, based on an analysis of 11 states accounting for three-quarters of GSDP, warned that this will impact the badly-needed capital expansion measures by the states as resources will be ploughed to service debt. Besides, as per provisional data available on the NSE, foreign institutional investors (FIIs) have net offloaded shares worth Rs 3,288.18 crore. Agriculture industry stocks will be in focus as food secretary Sudhanshu Pandey said the Centre’s wheat procurement is set to decline by more than half to 19.5 million tonnes in the current rabi marketing year amid higher exports and likely fall in output, and asserted there won’t be any concern for meeting the domestic demand under the Public Distribution System. There will be some reaction in Apparel industry related stocks as Apparel exporters’ body AEPC urged the government to take immediate measures to contain rising prices of raw materials as the continuous surge has impacted the entire value chain of the industry. There will be lots of earnings reaction based on the performance of the companies.

The US markets ended higher on Wednesday after the US Federal Reserve hiked interest rates by 50 bps and announced its plan to trim the $9 trn asset portfolio from June onwards. Asian markets are trading mostly in green on Thursday amid thin trade following overnight gains on Wall Street.

Back home, Indian equity markets ended lower for the third consecutive session, falling over 2 per cent on Wednesday after the Reserve Bank of India (RBI) announced a surprise repo rate hike in an unscheduled meeting. The markets, were, already on tenterhooks awaiting the US Federal Reserve meeting outcome later tonight, wherein a 50 bps rate hike is anticipated. After making slightly positive start, markets soon turned negative and stayed in red for whole day as some cautiousness came in with the International Monetary Fund (IMF) said India may only become a $5-trillion economy in FY29. According to data from the IMF's World Economic Outlook Database, updated last month, India's nominal GDP is seen rising to $4.92 trillion in FY28. As such, it will only be in the following year, or FY29, that the GDP will cross the $5-trillion mark. Traders also took a note of rating agency ICRA’s statement that the state government borrowings through the bond market could be lower by Rs 50,000 crore in Q1FY23 at Rs 1.4 trillion. Markets traded deep in red in late afternoon session after Reserve Bank of India (RBI) has increased the policy repo rate under the liquidity adjustment facility (LAF) by 40 basis points to 4.40 per cent with immediate effect. RBI said core inflation is likely to remain elevated in the coming months, reflecting high domestic pump prices and pressures from prices of essential medicines. It also said renewed lockdowns and supply chain disruptions due to resurgence of COVID-19 infections in major economies could sustain higher logistics costs for longer. Adding more concerns among traders, a paper by the National Council of Applied Economic Research (NCAER) said that India should take a cautious approach towards launching a central bank digital currency (CBDC) as it could be hazardous to institutions, retail-end users, and to the reputation of the central bank. Traders overlooked data indicated that India's merchandise exports rose by 24.22 percent to $38.19 billion in April 2022 as compared to $30.75 billion in April 2021 on account of healthy performance by sectors like petroleum products, electronic goods, and chemicals. Finally, the BSE Sensex fell 1306.96 points or 2.29% to 55,669.03 and the CNX Nifty was down by 391.50 points or 2.29% to 16,677.60.

Above views are of the author and not of the website kindly read disclaimer