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Market Commentary 24 October 2018
Markets likely to make cautious start amid weak global cues


Bears continued to be in a dominant position on Tuesday, as key equity indices closed the trading session lower for fourth consecutive session. After weak start, the markets remained in negative territory for whole day, amid reports that the crude oil import bill for India is expected to increase by $37 billion to $125 billion during the current financial year (2018-19, or FY19) - a 42% spike over the 2017-18 (FY18) bill of $88 billion. Domestic sentiments also got cautious with a private report stating that India is the second-most underinsured country in the world with an insurance gap of $27 billion (approximately Rs 1.98 lakh crore). Anxiety remained among the investors with another private report stating that the government doesn't have centralised information as yet on prosecutions launched against persons identified for suspicious cash deposits. Responding to an RTI filing by FE, the I-T department, however, said 11.8 lakh of the 23.5 lakh persons identified for suspicious post-demonetisation deposits and sent notices to by it on the e-filing portal replied to the queries raised. The street also got worried after Moody's Investors Service in its latest report stated that the profitability of Indian banks is distinctively weak compared to those in BRICS nations. The report explained that system wide asset quality in India is weak due to stressed public sector banks, which dominate the sector. However, market participants failed to take any sense of relief with EEPC India's statement that the government is responding well to the rising trade tensions between the world's two largest economies, maintaining a stance that serves the cause of Indian exporters best, realising how critical exports are for the country's big macro picture. Investors also overlooked Commerce Secretary Anup Wadhwan's statement that Indian exports will reach a record-high figure both in rupee and US dollar terms during the current financial year. Even firm tax collection data also failed to support the markets during the trading session. The net direct tax collection in India grew by 15.7% on year-on-year basis to reach Rs 4.89 lakh crore in the current fiscal till third week of October. This marks over 42% of the full-year direct tax collection target of Rs 11.5 lakh crore for the fiscal ending March 31, 2019. Finally, the BSE Sensex slipped 287.15 points or 0.84% to 33,847.23, while the CNX Nifty was down by 98.45 points or 0.96% to 10,146.80.


The US markets erased most of the early losses but still settled in red territory on Tuesday as a big drop in the Chinese market revived fresh questions about the global economy. The early sell-off on Wall Street reflected an extension of the significant weakness seen in overseas markets, which came amid worries about global economic growth and mounting geopolitical tensions. Besides, earnings reports from two industrial giants at the heart of the economy flashed warning signs. On top of that some 150 companies were slated to report earnings including several megacap companies, with investors seeking the degree to which higher interest rates are impacting the economy, as the Federal Reserve has indicated it will continue to tighten monetary policy by year's end. Caterpillar (CAT) plummeted by 7.6 percent even though the heavy equipment maker reported third quarter results that exceeded street estimates. Investors seem disappointed Caterpillar reaffirmed its full-year earnings guidance rather than raising its forecast. The company's comments about the impact of tariffs also weighed on the stock. Diversified manufacturer 3M Co. (MMM) also tumbled by 4.4 percent after reporting weaker than expected third quarter results and cutting its full-year guidance. On the other hand, shares of McDonald's (MCD) moved sharply higher after the fast food giant reported quarter earnings and revenues that beat expectations. Dow Jones Industrial Average fell 125.98 points or 0.50 percent to 25,191.43, Nasdaq declined 31.09 points or 0.42 percent to 7,437.54 and S&P 500 was down by 15.19 points or 0.55 percent to 2,740.69.


Crude oil futures declined on Tuesday amid speculation of a possible drop in demand for oil due to uncertainty about the outlook for global economic growth and on expectations that US crude inventories may have risen for a fifth straight week. Traders shrugged off fears about the impact of US sanctions against Iranian Oil on global crude supply after Saudi Arabia pledged to make up for the loss of Iranian oil, by playing a responsible role in the market. Benchmark crude oil futures for December declined $2.93 or 4.2 percent to settle at $66.43 a barrel on the New York Mercantile Exchange. December Brent crude fell $3.39 or 4.3 percent to settle at $76.44 a barrel on London's Intercontinental Exchanged.


Indian rupee ended marginally lower against US dollar on Tuesday, due to fresh demand for the American currency from banks and importers. Traders remained cautious with reports that the crude oil import bill for India is expected to increase by $37 billion to $125 billion during the current financial year (2018-19, or FY19) - a 42% spike over the 2017-18 (FY18) bill of $88 billion. Moreover, weakness in local stocks, which slipped for a fourth-straight session, also weighed on the rupee. However, the local currency trimmed most of its initial losses, as traders found some support with report that the net direct tax collection in the country grew by 15.7% on year-on-year basis to reach Rs 4.89 lakh crore in the current fiscal till third week of October. This marks over 42% of the full-year direct tax collection target of Rs 11.5 lakh crore for the fiscal ending March 31, 2019. On the global front, euro rose on Tuesday before a meeting of the European Commission on Italy's budget that could see Brussels take the unprecedented step of rejecting it and demanding changes. Finally, the rupee ended at 73.57, 1 paise weaker from its previous close of 73.56 on Monday.


The FIIs as per Tuesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 4864.68 crore against gross selling of Rs 5307.94 crore, while in the debt segment, the gross purchase was of Rs 125.57 crore with gross sales of Rs 933.17 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.55 crore against gross selling of Rs 2.26 crore.


The US markets ended lower on Tuesday as steep slide came after major US companies reported gloomy results and guidance. Asian markets were trading mostly in red on Wednesday following weakness on Wall Street amid concerns about the corporate earnings outlook in an environment of tightening financial conditions. Extending southward journey for the fourth straight session, Indian markets settled in red territory on Tuesday following weakness in global markets on growth concerns, while higher crude prices and weaker rupee continue to weigh on the sentiments. Today, the markets are likely to make cautious start of penultimate session of F&O expiry amid weak global cues. There will be some cautiousness with a private report that liquidity crunch may hurt economic growth. the report penciling in a few basis points shave off in economic growth in the December quarter if the hoarding of cash by banks and mutual funds continue threatening on-lending non-banking finance companies, the lifeline of lakh of medium and small enterprises. Traders may react to another private report that Private Equity (PE) investments moderated to $14.60 billion during January-September period, owing to macroeconomic concerns, market volatility and valuations of companies. Meanwhile, emerging markets guru Mark Mobius urged the Indian government to accelerate reforms and ease rules for exports to take advantage of the ongoing trade war globally. He said India has a potential to attract overseas investment and it can take advantage of the weak rupee and trade war to grab a bigger share of the exports market. There are enormous opportunities. There will be some buzz in the non-banking financial companies (NBFCs) stocks with report that the Reserve Bank of India (RBI) has cancelled the Certificate of Registration of 31 NBFCs. NBFCs have been under pressure recently due to fears of a liquidity crisis, high valuations and asset liability mismatches. Also, there will be some reaction in pharma sector stocks with ICRA's report that the domestic pharmaceutical industry is likely to register a moderate growth at 7-9 per cent in the period between FY18 and FY21. There will be lots of important earnings announcements too, to keep the markets in action.


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  • Bharti Airtel has collaborated with Google to truly simplify its customer service experience by integrating its customer care with the Artificial Intelligence-powered Google Assistant. 
  • Cipla's wholly owned subsidiary -- Cipla Medpro South Africa has completed the acquisition of 100% stake in Mirren on October 22, 2018. 
  • Bajaj Finance has reported a rise of 54.46% in its net profit at Rs 923.47 crore for Q2FY19 as compared to Rs 597.87 crore for Q2FY18. 
  • Maruti Suzuki's premium urban offering S-Cross has achieved the milestone of 1 lakh cumulative sales.
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