Earn­ings sea­son to lift mar­kets

Money Times - - Market Review - By Devendra A Singh

The Sen­sex slipped 1,850.15 points to set­tle at 34376.99 while the Nifty closed at 10316.45 los­ing 614 points for the week that ended on Fri­day, 5 Oc­to­ber 2018.

The RBI kept key rates un­changed. The Mone­tary Pol­icy Com­mit­tee (MPC) left the repo rate un­changed at 6.5% and re­verse repo rate at 6.25%.

RBI Gover­nor Ur­jit Pa­tel said “To­day’s stance of cal­i­brated tight­en­ing es­sen­tially means that in this rate cy­cle, a rate cut is off the ta­ble and that we are not bound to in­crease rates at ev­ery meet­ing. As new data comes in, we will look into chang­ing our poli­cies ac­cord­ingly.”

The In­dian ru­pee (INR) breached the 74 mark against the US dol­lar (USD) on Fri­day, 5 Oc­to­ber 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% a year ago. 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 the GDP in FY19.

FM Arun Jait­ley re­duced Rs.2.5/litre in petrol and diesel prices grant­ing some re­lief to the com­mon man. The Cen­tre re­duced the ex­cise duty by Rs.1.5/litre on petrol and diesel.

Along with this, Rs.1/litre will be ab­sorbed by state-run oil mar­ket­ing com­pa­nies. This ef­fec­tively leads to a cut of Rs.2.5/litre in petrol and diesel prices for con­sumers. On the mon­soon sce­nario, the IMD said that rain­fall in In­dia was be­low av­er­age and less than fore­cast with key crop-grow­ing north­ern states among ar­eas that re­ceived less rain than needed. Rains were 91% of the long-term av­er­age at the end of the Ju­lySeptem­ber mon­soon sea­son. In­dian mon­soon, which de­liv­ers about 70% of the coun­try’s an­nual rain­fall, is crit­i­cal for the farm sec­tor, which ac­counts for about a sixth of In­dia’s $2 tril­lion­plus econ­omy and em­ploys about half of the coun­try’s 1.3 bil­lion peo­ple. The govern­ment in its an­nual eco­nomic sur­vey for FY18 said that the pro­por­tion of ex­tremely dry or wet weather con­di­tions has grown steadily be­cause of cli­mate change with rain de­pen­dent ar­eas suf­fer­ing a

14.3% fall in agri­cul­tural rev­enue ow­ing to ex­treme rain­fall shocks.

The drop in rain­fall could lift food prices and stoke in­fla­tion, which is ex­pected to harden in the com­ing months be­cause of ris­ing fuel prices.

Last month, the US Fed­eral Open Mar­ket Com­mit­tee (FOMC) raised the overnight funds rate by a quar­ter points to a range of 2-2.25%. Risks to the eco­nomic out­look ap­pear roughly bal­anced. The out­look on rates for both 2019 and 2020 were also main­tained at 3.1% and 3.4% re­spec­tively.

US ser­vices sec­tor ac­tiv­ity raced to a 21-year high in Septem­ber. The In­sti­tute for Sup­ply Man­age­ment (ISM) said that its non-man­u­fac­tur­ing ac­tiv­ity in­dex jumped 3.1 points to 61.6 last month, the high­est read­ing since Au­gust 1997. A read­ing above 50 in­di­cates ex­pan­sion in the sec­tor, which ac­counts for more than two-thirds of US eco­nomic ac­tiv­ity. The ISM’s new or­ders sub-in­dex for the ser­vices sec­tor rose 1.2 points to a read­ing of 61.6 last month. The sur­vey's fac­tory em­ploy­ment mea­sure jumped to 62.4 in Septem­ber from 56.7 in Au­gust. This sug­gests Septem­ber's non-farm pay­rolls could sur­prise on the up­side when the govern­ment pub­lishes its closely watched em­ploy­ment re­port. Wash­ing­ton last month slapped tar­iffs on $200 bil­lion worth of Chi­nese goods, with Bei­jing re­tal­i­at­ing with du­ties on $60 bil­lion worth of US prod­ucts. USA and China had al­ready im­posed tar­iffs on $50 bil­lion worth of each other’s goods. Key in­dices ad­vanced on Mon­day, 1 Oc­to­ber 2018, on fresh buy­ing by traders. The Sen­sex gained 299 points to close at 36526.14 while the Nifty was up 77.85 points to close at 11008.30.

The In­dian stock mar­ket re­mained closed on Tues­day, 2 Oc­to­ber 2018, on ac­count of Ma­hatma Gandhi Jayanti 2018. Key in­dices fell on Wed­nes­day, 3 Oc­to­ber 2018, on ris­ing crude oil prices. The Sen­sex tum­bled 550.51 points to close at 35975.63 while the Nifty was down 150.05 points to close at 10858.25.

Key in­dices slipped fur­ther on Thurs­day, 4 Oc­to­ber 2018, ahead of RBI’s pol­icy. The Sen­sex tanked 806.47 points to close at 35169.16 while the Nifty was down 259 points to close at 10599.25.

Key in­dices cor­rected fur­ther on Fri­day, 5 Oc­to­ber 2018, af­ter the INR weak­ened to an all-time low of 74.23/USD. The Sen­sex de­clined 792.17 points to close at 34376.99 while the Nifty was down 282.80 points to close at 10316.45. The tur­moil over weak­en­ing of the INR and other global cur­ren­cies against the USD, ris­ing Brent oil prices to a 4-year high at $86/bar­rel and lo­cal bank­ing cues re­lated to NBFCs weighed down in­vestor sen­ti­ments. 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, US-China trade war along with devel­op­ments in the Mid­dle East and their im­pact on the global mar­kets.

The govern­ment is sched­uled to re­lease data based on whole­sale price in­dex (WPI) and 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 this month. China’s macro-eco­nomic data for Septem­ber 2018 is also due for re­lease in the next few weeks.

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