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NSE Intra-day chart (04 December 2018)
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Market Commentary 05 December 2018
Markets to make pessimistic start tracking weak global cues


Tuesday turned out to be a lackluster day for the Indian equity benchmarks, as both the larger peers settled with losses, ahead of RBI monetary policy meeting outcome. The markets made a cautious start and remained in red terrain throughout the day, as Crisil cut India's growth forecast for current fiscal to 7.4% on the back of weakening GDP growth and lower global trade forecasts. India's growth in the July-September quarter slipped to 7.1% from 8.2% in the April-June quarter. It added that India's export, which saw a revival in early part of 2018, could likely see a slower growth. Anxiety remained among the traders, amid reports that the recent move by the US government to change the method of H-1B visa allotment is a mixed bag for India. It added that while the move is expected to have a negative impact on the Indian technology services industry. The trade also remained lackluster with a private report that the 50 percent rise in shadow-banking loans in October was on account of difficulties in arranging money from money market alternatives but is unlikely to sustain. However, downside remained capped, supported by the finance ministry's statement that total Goods and Services Tax (GST) refunds to the tune of Rs 91,149 crore has been cleared by the Central Board of Indirect Taxes and Customs (CBIC) and the state authorities out of the total refund claims of Rs 97,202 crore received so far. Thus, the disposal rate of 93.77 percent has been achieved. Adding some relief, Revenue Secretary Ajay Bhushan Pandey said that the new simplified GST return forms will be rolled out from April 1, 2019. He also exuded confidence that the government will achieve the budgeted target for GST collection and said the revenue department is getting inputs about entities which are evading taxes. Meanwhile, CBDT chairman Sushil Chandra said that income tax return filing for assessment year 2018-19 has so far seen a 50 per cent rise since last year. He further said that demonetisation has been very good for increasing the tax base of the country. This year, we have already got around 6.08 crore income tax returns, which is 50 percent higher than last year by this particular date. Finally, the BSE Sensex plunged 106.69 points or 0.29% to 36,134.31, while the CNX Nifty was down by 14.25 points or 0.13% to 10,869.50.


After gaining in the previous session, the US markets ended lower with cut of over three percent on Tuesday, with the Dow Jones Industrial Average dropping by almost 800 points, as investors worried that a US-China trade truce reached over the weekend was not all it was cracked up to be. Doubts surrounding the US and China's ability to achieve a concrete deal to avoid new, or expanded, bilateral tariffs are rising, as investors focused on the lack of specific concessions made by China at last weekend's G-20 meeting in Argentina, where President Donald Trump and Chinese President Xi Jinping met. Meanwhile, confusion spread when exactly the 90-day timeline would begin, after White House economic adviser Larry Kudlow mistakenly stated that the negotiating window would begin on January 1, 2019. The White House later put out a correction, stating that it began on December 1. Besides, sentiments were down beat as the yield on two-year notes rose above the yield on five-year notes, which is seen as an indicator of an upcoming economic slowdown. Moreover, profit taking contributed to the sell-off following the strong gains posted on Monday. The markets will be closed Wednesday as the nation stops to mourn former President George H.W. Bush, who died Friday at 94. Dow Jones Industrial Average dropped 799.36 points or 3.10 percent to 25027.07, S&P 500 plunged 90.31 points or 3.24 percent to 2700.06 and Nasdaq was down by 283.09 points or 3.80 percent to 7158.43.


Crude oil futures once again ended higher on Tuesday as traders continued to weigh the likelihood of an output-cut agreement later this week between major oil producers. That expectation was strengthened after Russian President Vladimir Putin said over the weekend that he and Saudi Crown Prince Mohammed bin Salman agreed to extend reductions while meeting on the sidelines of the G-20 summit. However, up-move remain capped on private report that the American Petroleum Institute (API) reported that US crude supplies rose by 5.4 million barrels for the week ended November 30. The API data also showed stockpile increases of 3.6 million barrels in gasoline and 4.3 million barrels in distillates. Benchmark crude oil futures for January gained 30 cents or 0.6 percent to settle $53.25 a barrel on the New York Mercantile Exchange. February Brent crude added 39 cents or 0.6 percent to settle at $62.08 a barrel on London's Intercontinental Exchange.


In line with a minor fall in local equities, Indian rupee ended marginally weaker against the American currency on Tuesday, due to fresh dollar demand from banks and importers. Traders remained concerned with Crisil cutting India's growth forecast for current fiscal to 7.4% on the back of weakening GDP growth and lower global trade forecasts. India's growth in the July-September quarter slipped to 7.1% from 8.2% in the April-June quarter. It added that India's export, which saw a revival in early part of 2018, could likely see a slower growth. Some cautiousness also came with ICRA's statement that India's current account deficit is likely to rise to 3% of GDP in the July-September quarter of current fiscal, from 2.4% in the preceding quarter, driven mainly by high crude oil prices. On the global front, dollar weakened in Asia on Tuesday as US Treasury yields fell to three-month lows, with investors fretting over a possible pause in the Federal Reserve's rate-hike cycle and portents of recession seen in a yield curve inversion. Finally, the rupee ended at 70.49, 4 paise weaker from its previous close of 70.46 on Monday.


The FIIs as per Tuesday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 5214.91 crore against gross selling of Rs 5052.88 crore, while in the debt segment, the gross purchase was of Rs 798.29 crore with gross sales of Rs 2339.16 crore. Besides, in the hybrid segment, the gross buying was of Rs 1.24 crore against gross selling of Rs 0.36 crore.


The US markets ended sharply lower on Tuesday, a biggest decline since the October rout, as investors worried about a bond-market phenomenon signaling a possible economic slowdown coupled with lingering worries around US-China trade. Asian markets are trading in red in early deals on Wednesday after an overnight plunge on Wall Street as investors worried about a potential economic slowdown and the state of the US-China trade war. Indian markets snapped six-session winning streak to settle in red territory on Tuesday as cautious investors weighed a host of factors like depreciating rupee, rising crude prices and weak global cues. Uncertainty over the longevity of recently enforced US-China trade truce also impacted sentiments. Today, the markets are likely to make pessimistic start tacking weak global cues. Investors will also be cautious ahead of the fifth Reserve Bank of India (RBI) Monetary Policy Committee meeting. According to reports, the RBI will keep its repo rate unchanged at 6.50% in the upcoming policy. Moreover, Investors will be eyeing Services PMI data for the month of November to be out later in the day. There will be some cautiousness with Niti Aayog Vice Chairman Rajiv Kumar's statement that the country's economy is likely to bounce back during the fourth quarter at a faster rate to match the overall projection for the current fiscal, but, he added that the economy is unlikely to recover in the third quarter from the slow pace during the last quarter. However, traders may take some support later in the day with Engineering Export Promotion Council's (EEPC) statement that India's engineering exports are likely to touch $80 billion this fiscal on account of healthy growth in key markets, including the US and Europe. Traders may also react to the Central Board of Direct Taxes chairman Sushil Chandra's statement that demonetisation led to an increase in the country's tax base, with income-tax filings jumping by as much as 50% over the previous year. He said the government will achieve its direct tax collection target of Rs 11.5 lakh crore in the current financial year. Traders may take note of report that a high-level panel recommended market regulator SEBI to allow direct listing of Indian companies on overseas bourses and of foreign firms on Indian exchanges. Currently, Indian companies can list their shares through depository receipts abroad, while foreign companies need to go through the Indian Depository Receipt route for listing of equities. Meanwhile, India and the United Arab Emirates signed a currency swap agreement to boost investment and enable direct trade without using dollars or other international currencies. There will be some buzz in telecom sector stocks with ICRA's report that the much-anticipated recovery in the telecom sector, backed by restoration of pricing power, may be delayed because intense competition is likely to persist. It added that the recent rupee depreciation and higher diesel prices are likely to have further hurt India's telecom industry.


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