Mar­ket de­scends on global wor­ries

Money Times - - Market Outlook/Market Review - By Deven­dra A Singh

The Sen­sex tanked 350.17 points to set­tle at 31922.44 while the Nifty closed at 9964.40 los­ing 121 points for the week end­ing Fri­day, 22 Septem­ber 2017.

On macro-eco­nomic data, In­dia’s April-June 2017 cur­rent ac­count deficit (CAD) widened to its high­est in four years as im­ports surged but strong cap­i­tal in­flows com­fort­ably fi­nanced the gap. Ex­ports grew 10.29%, the high­est in the last four months, to $23.81 bil­lion in Au­gust 2017. CAD widened to 2.4% of the coun­try’s GDP or $14.3 bil­lion as im­ports pushed the trade deficit to $41.2 bil­lion from $23.8 bil­lion in the pre­vi­ous cor­re­spond­ing pe­riod. De­spite a wider cur­rent ac­count gap, the bal­ance of pay­ments sur­plus was $11.4 bil­lion in April-June 2017 v/s $6.97 bil­lion a year ago, helped by strong dol­lar in­flows that boosted the ru­pee 0.43% dur­ing the quar­ter. In­dia’s cap­i­tal sur­plus, which in­cludes FDI and port­fo­lio in­flows, stood at $25.4 bil­lion v/s $7.18 bil­lion sur­plus a year ago.

In­dia’s gold im­ports recorded a three-fold jump to $15.24 bil­lion dur­ing April-Au­gust 2017. In Au­gust 2017, gold im­ports rose to $1.88 bil­lion from $1.11 bil­lion in Au­gust 2016. The surge in gold im­ports last month con­trib­uted to the widen­ing of trade deficit to $11.64 bil­lion as against $7.7 bil­lion in Au­gust 2016. In­dia’s forex re­serves surged by $2.604 bil­lion to reach an all-time high of $400.726 bil­lion in the week ended 8 Septem­ber 2017. For­eign cur­rency as­sets (FCAs), a ma­jor com­po­nent of the over­all re­serves, grew $2.568 bil­lion to $376.209 bil­lion last week.

Gold re­serves re­mained un­changed at $20.691 bil­lion. The spe­cial draw­ing rights (SDRs) with the In­ter­na­tional Mon­e­tary Fund (IMF) rose by $14.2 mil­lion to $1.520 bil­lion. The coun­try’s re­serve po­si­tion with the IMF also rose by $21.4 mil­lion to $2.304 bil­lion. Ac­cord­ing to HSBC, In­dia is likely to over­take Ja­pan and Germany to be­come the third largest econ­omy in the next

10 years in nom­i­nal dol­lar terms and the tran­si­tion will hap­pen even ear­lier on a PPP (pur­chas­ing power par­ity) ba­sis. But it needs to be con­sis­tent in the reforms and fo­cus more on the so­cial sec­tor.

“So­cial cap­i­tal is in­suf­fi­cient in the coun­try and spend­ing on as­pects like health and ed­u­ca­tion is not just de­sir­able for In­dia’s own sake but is also cen­tral to eco­nomic growth and po­lit­i­cal sta­bil­ity”, it said.

Its es­ti­mates show In­dia will be a $7 tril­lion econ­omy in 2028 as com­pared to less than $6 tril­lion and $5 tril­lion for Germany and Ja­pan, re­spec­tively. Cur­rently, In­dia’s GDP is around $2.3 tril­lion (FY17). It stands at the fifth spot in global rank­ings. It said that the growth rate which will be lower in FY18 as com­pared to 7.1% in FY17 due to the in­tro­duc­tion of GST but will re­cover from next year in a sus­tain­able fashion.

In­dia will con­tinue to be a ser­vices-ori­ented econ­omy but needs to pay ex­tra at­ten­tion to man­u­fac­tur­ing and farm sec­tors as well, it said adding that it would be de­sir­able to main­tain the con­tri­bu­tion of man­u­fac­tur­ing, agri­cul­ture and ser­vices at the cur­rent lev­els.

On the US front, the US Fed­eral con­cluded its two-day mon­e­tary pol­icy meet on Wed­nes­day, 20 Septem­ber 2017, and kept the in­ter­est rates un­changed. The Fed stated that it will be­gin rolling off its $4.5 tril­lion bal­ance sheet most of which con­sists of the Trea­suries and mort­gage-backed se­cu­ri­ties in Oc­to­ber 2017. Higher US in­ter­est rates will at­tract for­eign in­vest­ments from emerg­ing mar­kets to USA.

Key in­dex ad­vanced on Mon­day, 18 Septem­ber 2017, on buy­ing by traders. The Sen­sex was up 151.15 points (+0.47%) to close at 32423.76.

Key in­dex climbed on Tues­day, 19 Septem­ber 2017, on ex­tended buy­ing. The Sen­sex was up 21.39 points (+0.07%) to set­tle at 32402.37.

Key in­dex edged lower on Wed­nes­day, 20 Septem­ber 2017. The Sen­sex was down 1.86 points (-0.01%) to close at 32400.51.

Key in­dex fell on Thurs­day, 21 Septem­ber 2017, on sell­ing. The Sen­sex was down 30.47 points (-0.09) to close at 32370.04.

Key in­dex tum­bled on Fri­day, 22 Septem­ber 2017, on correction. The Sen­sex plunged 447.60 points (-1.38%) to close at 31.922.44.

Events like na­tional and global macro-eco­nomic fig­ures will dic­tate the move­ment of the global mar­kets and in­flu­ence in­vestor sen­ti­ment in the near fu­ture.

The Septem­ber 2017 F&O con­tracts ex­pire on Thurs­day, 28 Septem­ber 2017.

On the US front, US Q2 GDP data is sched­uled for re­lease on Thurs­day, 28 Septem­ber 2017.

On the China front, China’s Man­u­fac­tur­ing PMI data for Septem­ber 2017 is sched­uled to be out on Fri­day, 29 Septem­ber 2017.

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