Earnings season to lift markets
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.