RBI pol­icy to dic­tate trend

Money Times - - News - By Deven­dra A Singh

The Sen­sex plunged 614.46 points to set­tle at 36227.14 while the Nifty closed 212.65 points lower at 10930.45 for the week that ended on Fri­day, 28 Septem­ber 2018.

The gov­ern­ment re­ported a fis­cal deficit of Rs.5.9 lakh crore ($81.4 bil­lion) for April-Au­gust 2018 or 94.7% of the bud­geted tar­get for FY19 com­pared to 96.1% in FY18. Net tax re­ceipts in the first five months of FY19 were Rs.3.66 lakh crore. The gov­ern­ment ex­pects to trim the deficit to 3.3% of GDP this fis­cal year af­ter meet­ing an up­wardly re­vised fis­cal deficit tar­get of 3.5% of GDP in FY18.

World Trade Or­ga­ni­za­tion (WTO) ex­pects world trade growth to be slower than pre­vi­ously thought in 2018 and 2019 although the di­rect eco­nomic ef­fects of a trade war that has blown up this year have been mod­est so far. The WTO fore­casts world trade in goods to grow 3.9% this year.

The WTO said in its state­ment that some of the down­side risks it had warned of in April had now ma­te­ri­al­ized. The di­rect eco­nomic ef­fects of these mea­sures have been mod­est to date but the un­cer­tainty they gen­er­ate may al­ready be hav­ing an im­pact through re­duced in­vest­ment spend­ing. “While trade growth re­mains strong, this down­grade re­flects the height­ened ten­sions that we are see­ing be­tween ma­jor trad­ing part­ners,” WTO Direc­tor-Gen­eral Roberto Azevedo said.

Since the WTO’s pre­vi­ous fore­cast, US Pres­i­dent Don­ald Trump has launched a trade war by im­pos­ing tar­iffs on hun­dreds of bil­lions of dol­lars of im­ports from China which has hit back with tar­iffs of its own as well as tax­ing alu­minum and steel im­ports from around the world to pro­tect US jobs. Mr. Trump has also threat­ened to slap tar­iffs on vir­tu­ally all Chi­nese goods if China does not back off.

The Fed­eral Open Mar­ket Com­mit­tee (FOMC) raised the overnight funds rate by a quar­ter points to a range of 2-2.25% in view of re­al­ized and ex­pected la­bor mar­ket con­di­tions and in­fla­tion. Mem­bers of the rate-set­ting com­mit­tee kept their year 2018 me­dian fore­cast for in­ter­est rates un­changed at 2.4% sug­gest­ing that a De­cem­ber rate hike re­mained in play, which would take the to­tal rate hikes in 2018 to four. The out­look on rates for both 2019 and 2020 were also main­tained at 3.1% and 3.4% re­spec­tively.

In a sign of con­fi­dence in the USA econ­omy, mem­bers of the rate-set­ting com­mit­tee raised their eco­nomic growth pro­jec­tion for this year fore­cast­ing USA eco­nomic growth of 3.1% in FY18. The growth out­look for 2019 was hiked by 10 bps to 2.5% but re­mained un­changed for 2020. The US Fed­eral left its out­look on in­fla­tion un­changed fore­cast­ing corePCE in­fla­tion out­look for 2018 at 2%.

Key in­dices cor­rected on Mon­day, 24 Septem­ber 2018, on a huge sell-off by the FIIs. The Sen­sex slumped 536.58 points to close at 36305.02 while the Nifty was down 175.7 points to close at 10967.4.

Key in­dices ad­vanced on Tues­day, 25 Septem­ber 2018, on fresh buy­ing by mar­ket par­tic­i­pants on ac­count of pos­i­tive cues. The Sen­sex surged 347.04 points to close at 36652.06 while the Nifty gained 100.05 points to close at 11067.45. Key in­dices ended lower on Wed­nes­day, 26 Septem­ber 2018, on ac­count of ris­ing crude oil prices which are hov­er­ing near $82/bar­rel. The Sen­sex fell 109.79 points to close at 36542.27 while the Nifty was down 13.65 points to close at 11053.8.

Key in­dices ex­tended sell­ing-off eq­ui­ties on Thurs­day, 27 Septem­ber 2018, as fi­nan­cial cri­sis in the NBFC sec­tor weak­ened the mar­ket sen­ti­ment. The Sen­sex tum­bled

218.10 points to close at 36324.17 while the

Nifty was down 76.25 points to close at 10977.55.

Key in­dices set­tled lower on Fri­day, 28 Septem­ber 2018, as the mar­kets wit­nessed a down­trend over the NBFC cri­sis. The Sen­sex fell 97.03 points to close at 36227.14 while the Nifty was down 47.1 points to close at 10930.45.

The In­dian stock mar­ket will re­main closed on Tues­day, 2 Oc­to­ber 2018, on ac­count of Ma­hatma Gandhi Jayanti 2018.

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.

The RBI mon­e­tary pol­icy re­view meet will be held on 5 Oc­to­ber 2018. The HSBC Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex

(PMI) and the HSBC Ser­vices PMI for Septem­ber 2018 are sched­uled for re­lease in the first week of Oc­to­ber 2018.

The gov­ern­ment is sched­uled to re­lease data based on whole­sale price in­dex (WPI) and the com­bined con­sumer price in­dices (CPI) for ur­ban and ru­ral In­dia for Septem­ber 2018 by mid-Oc­to­ber 2018.

On the global front, USA and other Euro-na­tions macro-eco­nomic data for Septem­ber 2018 is sched­uled for re­lease in the first week of Oc­to­ber 2018. China’s macro-eco­nomic data for Septem­ber 2018 is also due for re­lease in the next few weeks.

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