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Market Commentary 17 December 2018
Markets to make optimistic start amid positive regional cues


Benchmark indices experienced volatility on the last trading day of the week but managed to end higher, amid easing wholesale price index (WPI) inflation data. WPI slowed down to 4.64% in November from 5.28% in October. Build up inflation rate in the financial year so far was 4.73% compared to a build up rate of 2.83% in the corresponding period of the previous year. The markets started on weak note, as anxiety spread among traders, with SBI Research's report stating that Modi government may announce a holistic or selective farm loan waiver, however, it could be the ‘worst solution' to alleviate farmers' distress. Adding more anxiety, global credit ratings agency Moody said that liquidity constraints faced by some non-bank financial institutions (NBFIs) will likely tighten overall credit supply and slow India's economic growth rate to just above 7% for the fiscal 2019 and 2020. In addition, any further distress in the Indian NBFI sector will pose significant downside risks to India's growth outlook. The key indices fluctuated in green and red terrain during the whole trading session, impacted by Former Reserve Bank of India (RBI) governor Raghuram Rajan's statement that the Indian economy is not creating enough jobs and that growth is not benefiting everyone. Traders took note of Former Chief Economic Advisor Arvind Subramanian's statement that the RBI is adequately capitalised, but the money should be used for fixing the financial system, not for financial deficit or financing government expenditure. Separately, the International Monetary Fund said that operational independence of central banks like the RBI was important for carrying out their responsibilities. But, the end of day was positive, despite weak cues from global markets. The traders took support with Export-Import (Exim) Bank report that India's merchandise shipments are expected to rise by 7% to $82.39 billion during the third quarter this fiscal. Non-oil exports are projected to increase by 7.2% to $71.45 billion. Finally, the BSE Sensex surged 33.29 points or 0.09% to 35,962.93, while the CNX Nifty was up by 13.90 points or 0.13% to 10,805.45.


The US markets ended sharply lower on Friday, with losses of around two percent, after weaker-than-expected data in China and Europe exacerbated concerns of a global economic slowdown. Besides, retail sales growth numbers for November also missed expectations. This is the latest sign shown by China that its economy may be slowing down. The data also underscored the rising risks to China's economy as Beijing works to resolve an ongoing trade war with the US. Industrial production in China grew by 5.4% for November on a year-over-year basis, the slowest pace in almost three years. Moreover, a report showing growth in the eurozone private sector has decelerated to its slowest pace in more than four years in December added to the negative sentiment. On the economic front, the Commerce Department released a report showing slightly weaker than expected retail sales growth in November due to a steep drop in sales by gas stations, although underlying retail sales growth remained strong. The Commerce Department said retail sales edged up by 0.2% in November after spiking by an upwardly revised 1.1% in October. Street had expected retail sales to rise by 0.3% compared to the 0.8% increase originally reported for the previous month. Meanwhile, the report said closely watched core retail sales, which exclude autos, gasoline, building materials and food services, increased by 0.9% in November after climbing by an upwardly revised 0.7% in October. Dow Jones Industrial Average slipped 496.87 points or 2.02 percent to 24,100.51, Nasdaq fell 159.67 points or 2.26 percent to 6,910.67 and S&P 500 was down by 50.59 points or 1.91 percent to 2,599.95.


Crude oil futures ended sharply lower on Friday on profit booking on concerns that demand may slump amid slowing economic growth. The latest batch of data from China showed a slower pace of growth in industrial production and retail sales. Also, disappointing economic data from the eurozone and the European Central Bank President Mario Draghi's warning that the balance of risks is moving to the downside, and the lowering of GDP and inflation forecasts for the eurozone has raised concerns that energy demand is likely to drop notably in the near to medium term. Benchmark crude oil futures for January declined $1.38 or 2.6 percent to settle $51.20 a barrel on the New York Mercantile Exchange. February Brent crude fell $1.17 or 1.9 percent to settle at $60.28 a barrel on London's Intercontinental Exchange.


Reversing previous session's gains, Indian rupee ended weaker against dollar on Friday, on increased demand for the US currency from importers. Traders remain concerned about global credit ratings agency Moody's statement that liquidity constraints faced by some non-bank financial institutions (NBFIs) will likely tighten overall credit supply and slow India's economic growth rate to just above 7% for the fiscal 2019 and 2020. In addition, any further distress in the Indian NBFI sector will pose significant downside risks to India's growth outlook. Also, the dollar's strength against its rival currencies overseas put pressure on the rupee. On the global front, euro fell on Friday as the euro zone economy showed more signs it's beginning to sputter, while the dollar made some headway as investors turned nervous about a slowdown in China. Finally, the rupee ended at 71.90, 22 paise weaker from its previous close of 71.68 on Thursday.


The FIIs as per Friday's data were net buyers in equity and debt segments both. In equity segment, the gross buying was of Rs 4900.13 crore against gross selling of Rs 4486.60 crore, which in the debt segment, the gross purchase was of Rs 2702.58 crore with gross sales of Rs 1826.38 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.76 crore against no selling.


The US markets settled in red territory on Friday amid renewed concerns about the outlook for global economic growth following the release of data showing disappointing industrial output and retail sales growth in China. Asian markets were trading mixed on Monday after weak economic data from China and Europe added to evidence of cooling global growth and reinforced anxiety over the impact of international trade frictions on business and profits. Indian markets ended Friday's choppy trading session slightly in green, amid negative signals from other Asian markets, and mixed macro cues like weakening rupee and easing crude prices. Today, the markets are likely to make optimistic start amid positive regional cues. The commerce ministry's latest data showed that India's exports grew by a meager 0.80% to $26.5 billion in November, even as the trade deficit widened to $16.67 billion. Exporters attributed the marginal export growth in November to high base effect, as the foreign shipments in the comparable month of the previous fiscal were quite high at $26.29 billion. Besides, imports rose by 4.31% to $43.17 billion during the month. Traders will be getting some encouragement with Finance Minister Arun Jaitley's statement that the government will stick to the 3.3% fiscal deficit target in the current financial year. He also said India will clock a growth rate of 7-8% despite global uncertainties and will retain the tag of the world's fastest-growing major economy. Traders also may take note of the Reserve Bank of India (RBI) data showing the country's foreign exchange reserves increased by $16.6 million to $393.734 billion in the week to December 7, mainly due to a rise in foreign currency assets. However, there may be some cautiousness with a private report indicating that weakening exports, rising crude prices and a stronger US dollar are pulling down rupee even as foreign portfolio investor (FPI) inflows into the stock markets have seen some uptick in recent times. Meanwhile, Economic Affairs Secretary Subhash Chandra Garg said the Indian economy has a large overhang of public debt and there is a need to focus on reducing this in the next 4-5 years. There will be some buzz in the  hospitality industry related stocks with Icra's report that the hospitality industry is expected to grow annually by 9-10% over the next four years, mainly due to robust domestic demand and a muted supply pipeline.


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  • Infosys has formed a Joint Venture with Hitachi, Panasonic Corporation and Pasona Inc., strategically enhancing its presence in Japan. 
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  • IOC is all set to buy back 29760 crores shares for around Rs 4435 crore, as the government is looking to meet budget deficit for FY 2018-2019.
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