NSE Intra-day chart (06 March 2018)
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Market Commentary 07 March 2018
Markets likely to make flat-to-positive start


Extending their southward journey for fifth straight session, Indian equity benchmarks ended the Tuesday's trade with a cut of over a percentage point, breaching their crucial 33,400 (Sensex) and 10,250 (Nifty) levels. Markets started the session on an optimistic note and traded in green terrain for most part of the day, as traders took some encouragement with report that the economy will grow up to 7.5 per cent in FY19, supported by domestic consumption, policy push, and synchronised global growth. In the current fiscal, GDP growth is expected to be 6.5 per cent. The Economic Survey 2018 has pegged FY19 growth at 7-7.5 per cent. Traders also took some support with a private report estimating that the Goods and Services Tax collection for 2018-19 would grow at a rate of 14-16 per cent, bringing it closer to the decadal growth rate in indirect taxes of just under 14 per cent. Reports that the Centre will constitute a group to suggest necessary changes in the policy for special economic zones (SEZs) too aided sentiments. Designed to facilitate exports, units in SEZs get certain fiscal and non-fiscal incentives such as no licencing required for imports and full freedom of sub-contracting, as well as direct and indirect tax benefits. Market participants also got support with report that the Reserve Bank of India (RBI) will inject Rs 1 lakh crore short term money into the banking system ahead of the financial year-end that normally sees cash crunch. However, sharp selling in last leg of trade mainly played spoil sport for the Indian markets, which dragged the key gauges lower. Traders remained concerned with a private report enlightening that India has signaled a larger fiscal deficit for the federal government for the year to March 2018 and while it has forecast a lower gap for next year, with a national election due in early 2019 many expect that target to be breached. Compounding those concerns are higher state government deficits, lower-than-expected revenues from the newly introduced goods and services tax, and farm loan waivers. Finally, the BSE Sensex tumbled 429.58 points or 1.27% to 33,317.20, while the CNX Nifty was down by 109.60 points or 1.06% to 10.249.25.


The US markets closed mostly higher on Tuesday, marked by swings in and out of negative territory as investors debated the potential impact of a trade war in the wake of President Donald Trump announcing a pair of tariffs, a strategy that has faced opposition from key Republicans such as House Speaker Paul Ryan. Investors will continue to follow Federal Reserve speakers for insights into the central bank's views on the economy. Separately, Dallas Fed President Rob Kaplan said he still expects three interest-rate increases this year, and that he wants to get started soon. Recent volatility in the market has come as investors fret that inflation could be returning to the economy, and that the Fed could have to become more aggressive in combating such a scenario. Meanwhile, Federal Reserve Governor Lael Brainard, the sole remaining member of the board who was appointed by President Barack Obama, said that a higher path of interest rates could become warranted if a variety of economic tailwinds give the economy forward thrust. On the economy front, US factory orders fell for the first time in six months in January amid lower demand for transportation and defence equipment. Factory orders slid 1.4 per cent to $491.7 billion in January from the previous month. While in line with market expectations, the figure stands in contrast to the 1.8 per cent increase recorded in December and marks the gauge's first drop since July. The Dow Jones Industrial Average added 9.36 points or 0.04 percent to 24,884.12, the Nasdaq gained 41.302 points or 0.56 percent to 7,372.01, and the S&P 500 was up by 7.18 points or 0.26 percent to 2,728.12. 


Crude oil futures continued its northward journey on Tuesday even as the government said to expect robust production from U.S. drillers. The U.S. Energy Information Administration (EIA) boosted its 2018 and 2019 forecasts on U.S. crude-oil production. The EIA raised its 2018 domestic crude production forecast by 1% to 10.7 million barrels per day. It also lifted its 2019 output forecast by 0.8% to 11.27 million barrels a day. The EIA, meanwhile, cut its 2018 views on West Texas Intermediate crude prices by 0.2% to $58.17 and Brent by 0.4% to $62.13 a barrel. It forecast an average 2018 natural-gas price of $2.99 per million British thermal units, down 6.6% from February's outlook. Benchmark crude oil futures for April delivery rose 3 cents or less than 0.1 percent at $62.60 a barrel on the New York Mercantile Exchange. May Brent crude gained 25 cents or 0.4 percent to settle at $65.79 a barrel on London's Intercontinental Exchange.


Indian rupee ended considerably stronger against the US dollar on Tuesday, on account of selling of the greenback by exporters. Investors took some encouragement with credit ratings agency, Crisil's latest report that India's gross domestic product (GDP) growth will improve sharply to 7.5% in the next fiscal year 2018-19 (FY19) from 6.5% expected this fiscal, propelled by domestic consumption, policy push, and synchronised global growth. Sentiments also got some boost with a private report estimating that the Goods and Services Tax collection for 2018-19 would grow at a rate of 14-16%, bringing it closer to the decadal growth rate in indirect taxes of just under 14%. However, sharp selling in domestic equity markets restricted the local unit's further up move. On the global front, the dollar edged higher against yen on Tuesday, supported by receding fears about a trade war stemming from US President Donald Trump's proposed tariffs on imported steel and aluminium. Finally, the rupee ended at 64.96, 14 paise stronger from its previous close of 65.10 on Monday.


The FIIs as per Tuesday's data were net sellers in equity segment, while they were net buyers in debt segment, in equity segment, the gross buying was of Rs 6148.37 crore against gross selling of Rs 6492.70 crore, while in the debt segment, the gross purchase was of Rs 516.62 crore with gross sales of Rs 267.81 crore. Besides, in the hybrid segment, the gross selling of Rs 2.41 crore against no buying.


The US markets closed higher on Tuesday amid easing geopolitical concerns following reports that North Korea is willing to talk about denuclearization. Asian markets were trading mixed on Wednesday, Asian markets traded mixed on Wednesday, as risk appetite appeared to recover slightly after taking a knock earlier on news that a top Trump economic advisor would be resigning. Indian markets edged lower on Tuesday to extend losses for the fifth straight session, with banking stocks coming under heavy selling pressure once again. Today, the start of the session is likely to be slightly in green, as traders may go for some bargain hunting after five sessions of continuous drubbing. Markets will get some support with report that the government is planning to pitch for an upgrade in its sovereign ratings from global rating agency Fitch, highlighting its structural reform initiatives and a revised fiscal consolidation framework. Officials from the Finance Ministry are scheduled to meet representatives from Fitch Ratings on March 7 as part of the annual review by the agency. Traders will also take some encouragement with private report that The Indian economy is likely to recover gradually to 7.1 per cent in the 2018-19 financial year, as GST-related disruptions have eased and consumption levels have improved.  However, growing fears over the PNB scam and continued selling pressure from FIIs on expectations of faster than anticipated interest rate hike in the U.S. may keep underlying sentiment cautious. Telecom stocks will be bussing on report that the Cabinet will on Wednesday take a call on providing relief to telecom operators, and look at raising the spectrum cap from the current 25 per cent to the industry demand of 35 per cent, among other things.

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