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Benchmarks likely to make pessimistic start
Mar-20-2019

Indian markets settled higher with notable gains on Tuesday to extend their northward journey for seventh straight session, on account of late hour buying amid continuous foreign fund inflow. Today, the markets are likely to make pessimistic start tracking mixed cues from global market. Investors will be eyeing outcome of the US Federal Reserve’s tow-day meeting, it is expected that Feb will stick to a dovish stance and unveil a plan to stop cutting bond holdings later this year. On the domestic front, trading volume may be thin ahead of holiday on March 21 on account of Holi. There will be some cautiousness with a report that Indian mutual funds and insurance firms, which scooped up shares while foreign institutional investors (FIIs) stayed away, turned net sellers of Rs 10,247.9 crore in March, even as FIIs returned to Indian markets. Some concerns may also come with a report that there is a 70% chance of El Nino climate cycle forming towards the second half of this year, a forecast that does not augur well for the monsoon season in India. However, traders may take note of Reserve Bank of India (RBI) governor Shakthikanta Das’ statement that the market response to the unconventional liquidity tool of dollar swap auction worth $5 billion has been received quite well. Meanwhile, economists raised concerns over a sharp slowdown in the Indian economy and pitched for a monetary policy boost to support growth at a meeting with the RBI chief on March 19. RBI governor Shaktikanta Das met more than a dozen economists to get their views on the economy ahead of the Monetary Policy Committee (MPC) decision due on April 4. Most economists expect the six-member MPC to cut the repo rate by 25 basis points for the second time in a row next month to 6.00 percent, a level last seen in August 2017. There will be some buzz in the real estate sector stocks as the all-powerful Goods and Services Tax (GST) Council approved a transition plan for the implementation of new tax structure for housing units. It has decided that builders can pick between paying 12% for non-affordable houses with ITC benefits or 5% without the tax rebates for under-construction houses. Likewise, for affordable housing projects, builders can choose between 8% with tax rebates or 1% without it. The new rates, without ITC benefits, will apply for all projects that begin construction only after April 1.

The US markets ended mixed on Tuesday, as investors hoped for a more accommodative policy stance at the end of the Federal Reserve's two-day meeting on March 20. Asian markets are trading mixed on Wednesday following a series of conflicting reports on US-China trade that surfaced overnight.

Back home, extending their winning streak to seventh straight session, Indian equity benchmarks closed the trading session with strong gains on Tuesday. The start of the day was positive, aided by reports that the net direct tax collection figure has crossed the Rs 10 lakh crore mark as on March 16, helped by the fourth and final installment of tax payment. The entire advance tax data from across the country has not come yet. The net direct tax collection during April-January of this fiscal stood at Rs 7.89 lakh crore as against Rs 12 lakh crore targeted for the entire fiscal of 2018-19. However, the trade remained thin for the most part of the session, ahead of the outcome of the 34th GST Council meeting. Traders were cautious with Niti Aayog CEO Amitabh Kant’s statement that India cannot achieve 9-10% Gross Domestic Product (GDP) growth without revolution in the farm sector. He said there is a need to boost investment in the agriculture sector as well as to introduce new technology and market reforms. However, key indices gained momentum in the last hours of the trade, aided by firm cues from European markets. The market participants got comfort with reports that an RBI-appointed panel sought suggestions from the public on long-term solutions for economic and financial sustainability of MSME sector, including ways to improve credit rating mechanism to help them raise funds at competitive rates. Adding optimism among the investors, ICRA, domestic rating agency, in its latest report said that the information technology (IT) services sector is likely to register a growth of 7-9% in next financial year (FY20) mainly on account of demand for digital solutions. It mentioned that the earlier small-scale proof of concept digital projects has started evolving into enterprise level larger implementations coupled with improvement in discretionary spend supporting future growth. Finally, the BSE Sensex rose 268.40 points or 0.70% to 38,363.47, while the CNX Nifty was up by 70.20 points or 0.61% to 11,532.40.
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