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NSE Intra-day chart (22 January 2019)
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Market Commentary 23 January 2019
Markets to make a mildly positive start


Key Indian equity markets suffered a massive bout of selling on Tuesday, with Sensex and Nifty ending lower by around 135 and 40 points, respectively. After a negative opening, the key indices traded in negative terrain throughout the session, with India Ratings' report warning that with populist decisions like farm loan waivers and other financial support schemes likely to gain significance in the run-up to the forthcoming next general elections, aggregate fiscal deficit of the states is expected to reach 3.2 per cent in FY20. It expects the states' revenue account on aggregate to clock a deficit of 0.5 per cent of Gross Domestic Product (GDP) in FY20 due to a higher growth in revenue spends than revenue receipt. Domestic sentiments also got hit with a private report stating that chief executive officers (CEOs) across the globe harbour a grim outlook towards 2019 and the economy with nearly 30 percent of them projecting a decline in global economic growth. This is surprising when seen against the record jump in optimism projected by CEOs just last year. Investors took note of a report that India has moved up one position to rank 80th on the global talent competitive index, but remains a laggard among the BRICS nations. Anxiety also remained among the investors, amid Crisil's latest report that even as 12 large states grew faster than national GDP in FY18, the same has not translated into job creation, as GSDP expansion has come in from sectors which are less job-intensive. It said 11 states have recorded lower growth in employment-intensive sectors such as manufacturing, construction and trade, and hotels, transport and communication services, compared with the national rate. But, the markets managed to come off their intraday low points in last leg of the trade, supported by the International Monetary Fund's (IMF) statement that India will further build its lead as the world's fastest-growing major economy as it picks up pace next year while the global economy is forecast to slow. India's GDP is forecast to expand 7.5% in FY20 and 7.7% in FY21, while China's growth is seen at 6.2% in both years. Some relief also came after the Reserve Bank of India (RBI) proposed to relax norms for entry of new players in the retail payment systems with a view to give a boost to innovation and competition. Finally, the BSE Sensex fell 134.32 points or 0.37% to 36,444.64, while the CNX Nifty was down by 39.10 points or 0.36% to 10,922.75.


The US markets ended lower on Tuesday on renewed concerns about global growth and the US-China trade war. The International Monetary Fund (IMF) said the global expansion is weakening at a rate that is somewhat faster than expected. The IMF lowered its forecasts for global economic growth to 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percentage points below last October's projections. The IMF said an escalation of trade tensions and a worsening of financial conditions are key sources of risk to the outlook. The IMF also expressed concerns about a bigger than expected slowdown in Chinese growth, the Brexit cliffhanger, and the ongoing US government shutdown. Besides, stocks were battered by reports that US turned down an offer by China to hold a preparatory meeting on trade negotiations due to a lack of progress in areas including forced technological transfers and economic reforms. On the economic front, the National Association of Realtors (NAR) released a report showing a much steeper than expected drop in US existing home sales in the month of December. NAR said existing home sales plummeted by 6.4% to an annual rate of 4.99 million in December after jumping by 2.1% to a revised rate of 5.33 million in November. With the much bigger than expected decrease, existing home sales tumbled to their lowest level since November of 2015. Dow Jones Industrial Average plunged 301.87 points or 1.22 percent to 24404.48, Nasdaq declined 136.87 points or 1.91 percent to 7020.36 and S&P 500 was down by 37.81 points or 1.42 percent to 2632.90.


Crude oil futures ended lower on Tuesday after a warning from the International Monetary Fund (IMF) and weak economic data out of China underlined concerns about global economic growth and energy demand. The IMF said it expects the global economy to grow 3.5% in 2019, down from a previous forecast of 3.7% in October and a growth rate of 3.7% in 2018. However, prices finished off the session's lows, finding some support from data released just ahead of the settlement that suggested a slowdown in US shale oil production. The Energy Information Administration (EIA) estimated a rise of 62,000 barrels a day in February shale oil output, from a month earlier, to 8.179 million barrels a day. Benchmark crude oil futures for February dropped $1.23 or 2.3 percent to settle $52.57 a barrel on the New York Mercantile Exchange. March Brent crude declined $1.24 or 2 percent to settle at $61.50 a barrel on London's Intercontinental Exchange.


Indian rupee continued to slide against the US dollar for the third day in a row on Tuesday, on sustained demand of the American currency. Traders were cautious with India Ratings' report warning that with populist decisions like farm loan waivers and other financial support schemes likely to gain significance in the run-up to the forthcoming next general elections, aggregate fiscal deficit of the states is expected to reach 3.2 per cent in FY20. It expects the states' revenue account on aggregate to clock a deficit of 0.5 per cent of Gross Domestic Product (GDP) in FY20 due to a higher growth in revenue spends than revenue receipt. Besides, a weak trend at Dalal Street coupled with US dollar's gain against other currencies overseas weighed on the local unit. On the global front, dollar held at a near three-week high on Tuesday as investors sought the relative safety of the U.S. currency after the International Monetary Fund cut its forecasts for the world economy in 2019 and 2020. Finally, the rupee ended at 71.44, 16 paise weaker from its previous close of 71.28 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 4941.11 crore against gross selling of Rs 4090.96 crore, while in the debt segment, the gross purchase was of Rs 546.84 crore with gross sales of Rs 1613.54 crore. Besides, in the hybrid segment, the gross selling was of Rs 0.24 crore against no buying.


The US markets settled lower on Tuesday as weak data out of China and lower global growth estimates from the International Monetary Fund renewed fears of the global economy slowing down. Asian markets were trading mostly lower in early deals on Wednesday on escalating signs of slowing global growth and concerns over a yet-unresolved Sino-US trade dispute. Snapping five-day winning streak, Indian markets settled in red territory on Tuesday amid profit-booking and lackluster global sentiment following poor outlook on the global economy. Today, the markets are likely to make slightly positive start amid fall in oil prices. Traders will be getting encouragement with the Reserve Bank of India's announcement of Rs 10,000 crore bond buyback on January 24, 2019, continuing with its commitment to provide adequate liquidity. The central bank had earlier committed to purchase government securities under its open market operations for an aggregate Rs 50,000 crore in January and has so far done Rs 30,000 crore. Some support will also come with former RBI governor Raghuram Rajan's statement that India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries. Rajan said Indian economy would continue to grow while growth rate is slowing down in China. Traders may take note of the Employees' Provident Fund Organisation's (EPFO) latest report showing that Employment generation in the formal sector increased by 48 per cent to touch a 15-month high of 7.32 lakh in November 2018 as compared to 4.93 lakh in the corresponding period in 2017. However, there may be some cautiousness following weak global cues amid uncertainty about global growth. Meanwhile, the SBI report said the government should opt for the unconditional cash transfer to farmers to alleviate agrarian distress rather than Universal Basic Income (UBI) scheme. There will be some buzz in the insurance industry related stocks with Moody's Investors Service stating that India's insurance and reinsurance sectors will grow strongly driven by strong economic growth and evolving regulatory regime. It said robust GDP expansion, coupled with current low insurance penetration, should support double digit growth for the non-life sector over the next 3-4 years. There will be some reaction in steel sector stocks with Steel Minister Chaudhary Birender Singh's statement that India is expected to edge past the US with regard to steel consumption this year. Also, there will be buzz in the power sector stocks with power minister RK Singh's statement that the recommendations of a high-level empowered committee (HLEC) on stressed power assets will be placed before the Cabinet soon for approval.


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