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Sensex, Nifty likely to make positive start
May-22-2019

Indian markets reversed gains on Tuesday and settled near intra-day low levels as euphoria over exit poll outcomes fizzled out amid profit booking in IT, banking and auto counters dragged indices lower. Today, the markets are likely to make an optimistic start following positive global cues. Besides, investors await final results of the 2019 Lok Sabha elections to be declared on May 23. Traders will be getting encouragement with the Organisation for Economic Co-operation and Development (OECD) in its Economic Outlook stating that India’s economic growth will regain strength and approach 7.5% by 2020 buoyed by rural consumption and subdued inflation. It added that this growth will come from higher domestic demand due to improved financial conditions, fiscal and quasi-fiscal stimulus, including new income support measures for rural farmers, and recent structural reforms. Also, some support will come with a report by the United Nations showing that India’s economy is projected to grow at 7.1% in fiscal year 2020 on the back of strong domestic consumption and investment. Traders may take note of a private report that land and labour reforms, privatisation and export promotion would be at the top of agenda of the new government irrespective of which party or coalition takes charge after the poll results on May 23. Meanwhile, to boost participation of mutual funds in the commodities market, the SEBI has allowed Mutual funds to invest in Exchange Traded Commodity Derivatives (ETCDs) with certain restrictions. There will be some buzz in the banking and non-banking financial companies (NBFCs) industry related stocks with the Reserve Bank of India’s (RBI) statement that a specialised cadre will be created within the RBI for supervision and regulation of financial institutions, including banks and NBFCs. There will be some reaction in steel sector stocks with rating agency India Ratings’ (Ind-Ra) report that a delay in auction of iron ore mines, whose licences are expiring by March next year, could hit steel production significantly in the country. Ind-Ra estimates that around 60 million tonnes of the actual production of iron ore from these mines could be disrupted.

The US markets ended higher on Tuesday following reports that the US temporarily eased restrictions on Chinese telecom giant Huawei. Asian markets are trading mostly in green on Wednesday, following gains on Wall Street, as Washington’s temporary relaxation of curbs against China’s Huawei Technologies overshadowed deeper worries about trade tensions.

Back home, Indian equity benchmarks failed to hold gains on Tuesday, with Sensex and Nifty closing lower by losses of around a percent each. After a positive start, key indices remained in green terrain during first half of the session, aided by the retirement fund body, Employment Provident Fund Organisation’s (EPFO) latest ‘Provisional Estimate of Net Payroll’ data report which showed that India created 8.15 lakh new jobs in the month of March 2019. According to the data report, 9962 new jobs were created in less than 18 age group category, while 214699 jobs in 18-21 age group category. Adding comfort among market participants, IHS Markit’s report stated that India’s economic policy will continue to focus on maintaining strong economic growth and creating jobs for the country’s large and growing population. It added that the government will also focus on the expansion of already announced policies including infrastructure investment, the Goods and Services Tax (GST) rationalisation and financial sector regulations. But, markets turned negative in second half of the trading session and ended on a pessimistic note, with Trade Promotion Council of India’s (TPCI) statement that the proposed Regional Comprehensive Economic Partnership (RCEP) agreement may hurt India's export competitiveness as the trade balance is already skewed. Traders also got worried with India Ratings and Research’s (Ind-Ra) latest report stating that a continued slowdown in loan disbursements by housing finance company, owing to tight liquidity condition, could have a spillover impact on retail home loan borrowers and property developers. Some concerns also came with a report that rising trade tensions have prompted the World Trade Organization (WTO) to dim its prospect for trade growth in the second quarter of the 2019 calendar year. The WTO said world trade growth is likely to remain weak into the second quarter of 2019. Finally, the BSE Sensex lost 382.87 points or 0.97% to 38,969.80, while the CNX Nifty was down by 119.15 points or 1.01% to 11,709.10.
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