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Markets to make optimistic start; GST Council meet eyed
Feb-20-2019

Indian markets extended their southward journey for eighth straight session on Tuesday, mainly on the back of late hour sell-off. Today, the markets are likely to make optimistic start of the day following positive global cues. Investors will be eyeing on the 33rd Goods and Services Tax (GST) Council meeting, due later in the day. Traders will be getting encouragement with report that the Union Cabinet approved promulgating an ordinance for companies law amendments to plug gaps in corporate governance and enforcement framework as well as improve the ease of doing business. There will be some support with Care Ratings’ report that signalling an end to the liquidity crisis that NBFCs have been facing since last September, corporate bond issuances by them have risen by 30% in January, reflecting renewed confidence among both issuers as well as investors. Traders will also be reacting to a report that the Cabinet approved a new electronics policy which aims to create a $400 billion electronic manufacturing ecosystem by 2025 and generate 1 crore jobs in the country. Traders may take note of the government’s statement that the revised Gross Domestic Product (GDP) figures for the demonetisation year was not cooked up and, in fact, the growth rates are likely to go up further due to the GST. On January 31, the government revised the GDP growth rates by 110 basis points (bps) from 7.1% to 8.2% for 2016-17, the year of demonetisation, and by 50 bps from 6.7% to 7.2% for fiscal 2017-18. There will be some buzz in the oil & gas sector stocks after the government approved new rules for bidding out oil and gas blocks as it reverted back to a two-decade-old system of awarding areas based on exploration work commitment, granted marketing and pricing freedom to yet to be developed discoveries and allowed ONGC to induct private firms in existing fields. There will be some reaction in sugar sector stocks with Crisil report stating that the hike in the minimum support price for sugar to Rs 31 a kg is likely to lead to a 300-400 basis points increase in operating margins of mills in the current sugar season.

The US markets ended in green on Tuesday on strong Walmart earnings and continued optimism over US-China trade talks. Asian markets are trading mostly higher on Wednesday after Donald Trump said US-China trade talks are going well.

Back home, last hour sell-off dragged Indian equity indices lower on Tuesday, with Sensex and Nifty closing below their crucial psychological levels of 35,500 and 10,650, respectively. After a positive start, the markets gained traction to trade firm for the most part of the session, as the Reserve Bank of India (RBI) said it would inject Rs 12,500 crore into the system through purchase of government securities on February 21 to increase liquidity. The purchase will be made through open market operations (OMOs). Trading sentiments got boost, with Union Minister of Commerce & Industry and Civil Aviation, Suresh Prabhu’s statement that exports have been growing for the last three years. He said the Ministry of Commerce and industry has made a plan to improve the ease of doing business at district level.  He also added that if GDP of districts grow by 3% it will lead to overall growth of national GDP. Adding enthusiasm among traders, the President of India, Ram Nath Kovind said that in trade and technology, agriculture and Antarctic science, cyberspace and satellites, India’s transformative growth and Argentine capabilities are creating new bilateral opportunities. However, in the last leg of the trade, the key indices erased all of their gains to settle in negative terrain, tracking weak European markets. The markets participants got cautious, with the S&P Global Ratings’ latest report stating that Indian corporates are likely to see slowdown in revenue growth over the next 12-24 months. In a report, S&P said that India's central government elections this year may pose additional risks for Indian corporates. A change of administration may trigger expansionary government spending that pushes up borrowing costs or raises inflation. The street were seen taking a note of the rating agency ICRA’s latest report that there is need to strengthen the corporate insolvency resolution process to ensure that the resolution plans approved by the National Company Law Tribunal (NCLT) are firmly implemented so that the sanctity of the process is maintained. Finally, the BSE Sensex fell 145.83 points or 0.41% to 35,352.61, while the CNX Nifty was down by 36.60 points or 0.34% to 10,604.35.
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