Tur­moil in mar­kets

Money Times - - NEWS - By Deven­dra A Singh

Eq­uity mar­kets col­lapsed last week as rightly fore­cast in our pre­vi­ous is­sue. The Sen­sex tum­bled 1,249.04 points to set­tle at 36,841.6 while the Nifty closed at 11143.10 los­ing 372.1 points for the week that ended on Fri­day, 21 Septem­ber 2018.

On the in­fla­tion front, whole­sale price in­fla­tion (WPI) stood at 4.53% in Au­gust 2018. WPI in­fla­tion in pri­mary ar­ti­cles eased to 0.1% from 1.73% in the pre­vi­ous month. In­fla­tion in man­u­fac­tured prod­ucts stood at 0.3%. Re­tail in­fla­tion fell be­low RBI’s medium-term tar­get in Au­gust 2018. Con­sumer prices rose 3.69% from a year ear­lier but down from July’s 4.17%.

The In­dian ru­pee de­pre­ci­ated against the US dol­lar this month to breach the 73 mark. The tum­ble has sparked dis­con­tent in a coun­try that re­lies heav­ily on im­ports for its fuel needs.

The In­ter­na­tional Mon­e­tary Fund (IMF) in its an­nual re­port on In­dia re­leased in Au­gust 2018 warned that av­er­age in­fla­tion was likely to rise to 5.2% in FY19 from a 17-year low of 3.6% in FY18.

PM Modi said that the size of the In­dian econ­omy will dou­ble to $5 tril­lion by 2022 with man­u­fac­tur­ing and agri­cul­ture con­tribut­ing $1 tril­lion each. He said that

In­dia will grow at over 8% rate with mas­sive em­ploy­ment gen­er­a­tion be­ing seen in IT and re­tail sec­tors. Macroe­co­nomic fun­da­men­tals of the econ­omy are strong. The govern­ment’s push for ‘Make in In­dia’ has led to 80% of mo­bile phones cur­rently in use be­ing man­u­fac­tured within the coun­try help­ing save Rs.3 lakh crore in for­eign ex­change. More­over, Fitch rat­ings has raised In­dia’s

Gross Do­mes­tic Prod­uct (GDP) growth fore­cast by 40 bps to 7.8% on the back of bet­ter-than-ex­pected out­turn in the sec­ond quar­ter.

FY19 started with a bang when it posted

8.2% growth in Q1FY19, how­ever, with the ap­pre­hen­sion that the high growth was against the low base of Q1FY18. The govern­ment re­ceived a lot of flak when the GDP fell to a three-year low of 5.7% in Q1FY19 due to dis­rup­tions caused by de­mon­eti­sa­tion and GST.

In its Global Eco­nomic Out­look re­port in Septem­ber 2018, Fitch said that the In­vest­ment-GDP ra­tio has stopped trend­ing down, helped by ramped-up pub­lic in­fra­struc­ture out­lays in par­tic­u­lar by state-owned en­ter­prises (SOEs).

“Fis­cal pol­icy should re­main quite sup­port­ive of growth in the run-up to elec­tions likely to be held in early 2019.

The govern­ment has also rolled out mea­sures to sup­port low-in­come earn­ers and ru­ral de­mand,” the agency said in the re­port. “While FY19 is likely to per­form bet­ter than es­ti­mated ear­lier in terms of GDP growth, the same is not the case with up­com­ing fis­cal years for which Fitch has shaved 0.2% point to 7.3%.

The eco­nomic out­look is sub­ject to sev­eral head­winds in­clud­ing tight­en­ing of fi­nan­cial con­di­tions, a ris­ing oil bill and weak bank bal­ance sheets,” Fitch said.

“The INR has been the worst-per­form­ing ma­jor Asian cur­rency so far this year. De­spite the cen­tral bank’s greater tol­er­ance for cur­rency de­pre­ci­a­tion, in­ter­est rates have been raised by more than an­tic­i­pated. Tighter fi­nan­cial

con­di­tions come against a back­drop of strained bank­ing sec­tor health with NPLs (non-per­form­ing loans/bad loans) at 10% of loans,” the agency added.

Key in­dices cooled-off on Mon­day, 17 Septem­ber 2018, on a strong sell-off of eq­ui­ties by FIIs. The Sen­sex de­clined 505.13 points to close at 37585.51 while the Nifty closed 137.45 points lower at 11377.75. Key in­dices fell on Tues­day, 18 Septem­ber 2018, on sell­ing by mar­ket par­tic­i­pants. The Sen­sex tanked 294.84 points to close at 37290.67 while the Nifty closed 98.85 points lower at 11278.9.

Key in­dices plunged on Wed­nes­day, 19 Septem­ber 2018, on neg­a­tive mar­ket sen­ti­ments. The Sen­sex fell 169.45 points to close at 37121.22 while the Nifty closed 44.55 points lower at 11234.35.

The In­dian stock mar­kets re­mained closed on Thurs­day, 20 Septem­ber 2018, on ac­count of Muhar­ram. Key in­dices de­clined fur­ther on Fri­day, 21 Septem­ber 2018, as the mar­kets wit­nessed a broad-based sell-off. The Sen­sex cor­rected 279.62 points to close at 36841.6 while the Nifty closed 91.25 points lower at 11143.1. Na­tional and global macro-eco­nomic fig­ures and events will dic­tate the move­ment of the mar­kets and in­flu­ence in­vestor sen­ti­ment in the near fu­ture. Mar­ket par­tic­i­pants will closely watch the fluc­tu­a­tions in global crude oil prices along with de­vel­op­ments in Iran and Tur­key and their im­pact in the forex mar­ket, where the INR breached the 73 mark against the USD last week.

On the global front, USA and other Euro-na­tions macro-eco­nomic data for Au­gust 2018 will be re­leased this week. Also, the US Fed­eral’s FOMC meet­ing for two-days is sched­uled for 25-26 Septem­ber 2018. China’s macro-eco­nomic data for Au­gust 2018 will also be re­leased this week.

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