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Markets likely to open in red amid weak set of macro-economic data

Oct-13-2022   08:34 Hrs IST

Indian markets rebounded and ended higher on Wednesday as value buying in energy, banking, IT, and FMCG shares helped the Indian indices cut short a three-day losing run. Today, markets are likely to start session in red tracking lackluster trade in global peers. Weak set of macro-economic data likely to dampen sentiments in domestic markets. India's retail inflation spiked to 7.41 per cent in September, mainly due to costlier food items. For the ninth month in a row, retail inflation has remained above the Reserve Bank of India's tolerance level of 6 per cent. Also, India's industrial growth, as per the Index of Industrial Production (IIP), slid to an 18-month low of -0.8 percent in August from 2.2 percent in July. Traders will be concerned as rating agency Crisil's research wing said India Inc is expected to report a three per cent year-on-year decline in profits for the July-September period. It added that this fall in profitability will be the fourth straight quarter of the decline in profits for the listed companies. Also, foreign institutional investors (FIIs) net sold shares worth Rs 542.36 crore on October 12, as per provisional data available on the NSE. However, some respite may come later in the day as industry chamber PHDCCI said going by the current trend, it is expecting the Indian economy to grow at 6-7 per cent during current fiscal year. Chamber's new president Saket Dalmia said production has bounced back and there is a big demand in the country. Traders may take note of the International Monetary Fund (IMF) report stating that India’s combined fiscal deficit (Centre + states) is likely to return to the pre-pandemic level (FY20) of 7.5 per cent of gross domestic product (GDP) only by FY27. Some support may also come with a private report stating that a combination of factors like wider opening, improving labour market and terms of trade for the rural sector will result in rural demand to rebound in India. There will be some buzz in coal industry stocks as Union Minister Pralhad Joshi said Coal India, accounts for over 80 per cent of the domestic coal output, will achieve 1 billion tonne coal production target by 2025-26 as against the earlier timeline of 2023-24 in view of the COVID-19 pandemic. Sugar industry stocks will be in focus the Directorate General of Foreign Trade (DGFT) said the validity for export of raw sugar to the US under Tariff-Rate Quota (TRQ) has been extended from September 30, 2022 to December 31, 2022. There will be some reaction in banking stocks as Moody's Investors Service said the Reserve Bank of India's slew of rate hikes this year to combat surging inflation will help lift banks' net interest margins, but the increase will be limited as funding costs will rise faster than loan rates. IT stocks will continue to hog limelight as they report their second quarter earnings of FY23. Infosys and Mindtree are likely to deliver their Q2FY23 performance on later in the day.

The US markets ended lower on Wednesday after minutes from the last Federal Reserve meeting showed policymakers agreed they needed to maintain a more restrictive policy stance. Asian markets are trading mostly in red on Thursday as investors await inflation data from the U.S. due later stateside.

Back home, Indian equity benchmarks halted a three-day losing streak on Wednesday and ended with gains of around a percent amid broad-based gains, shrugging off nervousness across global markets. After making flat-to-positive start, key gauges gained traction as traders took some support after Finance Minister Nirmala Sitharaman exuded confidence on India's relative and absolute growth performance in the rest of the decade and forecast the country's growth rate to be around 7% this financial year. Sentiments remained positive as Krishnamurthy Subramanian, Executive Director (India)- International Monetary Fund Designate, said India has emerged as a 'positive spot' in the world economy, due to the well-designed policy responses that were implemented during the COVID crisis. However, key indices erased all the gains to trade flat in late morning deals, as traders turned cautious with the International Monetary Fund (IMF) in its annual World Economic Outlook report stating that outlook for India is growth of 6.8 per cent in 2022 - a 0.6 percentage point downgrade since the July forecast, reflecting a weaker-than-expected outturn in the second quarter and more subdued external demand. But, markets regained traction in late afternoon session to settle near day’s high point. Traders took note of S&P Global Ratings’ statement that India is facing various factors that may shake its sovereign credit metrics but strong economic growth rate and external balance sheet are expected to neutralize the risks inherent in the global environment. S&P has the lowest investment grade rating of 'BBB-' on India with a stable outlook. Some support also came as the Reserve Bank of India (RBI) has raised the minimum capital requirement for setting up an asset reconstruction company (ARC) to Rs 300 crore from the existing Rs 100 crore in order to strengthen the securitisation sector which plays a vital role in the management of distressed financial assets. Finally, the BSE Sensex rose 478.59 points or 0.84% to 57,625.91 and the CNX Nifty was up by 140.05 points or 0.82% to 17,123.60.

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