FIIs book profits
The Sensex declined 417.95 points to settle at 34315.63 while the Nifty closed at 10303.55 losing 168.95 points for the week ended Friday, 19 October 2018.
India’s service sector continued to expand last month. The Nikkei India Services Business Activity index was at 50.9 in September 2018, down from 51.5 in August 2018 due to higher fuel costs, rising crude oil prices and a stronger US dollar, which raised the prices of imported goods. The seasonally adjusted Nikkei India Composite PMI Output Index was at 51.6 in September 2018, down from 51.9 in August and at its lowest level in four months. Trade deficit in September 2018 hit its lowest level in five months at $13.98 billion despite a rising oil import bill for India amid concerns that the US sanctions against Iran next month will remove a substantial volume of crude oil from world markets.
RBI Governor, Urjit Patel, cited that it is crucial for the fiscal deficit target to be maintained as any slippage will impact inflation and crowd out private sector investments apart from increasing market volatility. The government recently moved some of its borrowing from the market to National Small Savings Fund (NSSF) and other small savings instruments. The government also reduced its market borrowings, which may help maintain the deficit target. The government plans to reduce fiscal deficit to 3.3% of the country’s GDP in FY19 from 3.53% a year ago. The fiscal deficit target for FY19 is Rs.6.24 lakh crore.
Vital reforms have been implemented in India in recent years including the GST, the inflation-targeting framework, the Insolvency and Bankruptcy Code (IBC) and steps to liberalise foreign investment and make it easier to do business. The International Monetary Fund (IMF) acknowledged the economic reforms carried out under Prime Minister Modi and projected India to be the world’s fastest growing major economy this year and next year. It maintained its 7.3% growth projection for this year made in July 2018. “Stability-oriented macro-economic policies and progress on structural reforms continue to bear fruit in the country. India’s medium-term growth prospects remain strong at 7.75% benefiting from the ongoing structural reform,” the IMF report said.
A World Economic Outlook (WEO) release said that India’s growth rate of 6.7% in 2016, the growth projections for this year and the next reflect a rebound from transitory shocks of demonetisation and the implementation of GST and strengthening investment and robust private consumption.
The IMF said that it would lower the growth projections for China for next year made in April by 0.2% to 6.2%, given the latest round of US tariffs on Chinese imports. It maintained this year’s growth for China at 6.6%. For the overall global economy, the IMF cut the growth projections made in July 2018 for this year and the next year by 0.2% to 3.7% as IMF Chief Economist, Maurice Obstfeld, warned that there are clouds on the horizon and the likelihood of further negative shocks to their growth forecast has risen.
WEO cited the uncertainties in trade as a result of US President Donald Trump's policies and the tightening of financial markets in developing countries among factors increasing the risks to global growth.
On the US front, manufacturing output rose 0.2% in September after rising 0.3% in August. Motor vehicle production was up 1.7%, which helped to lift manufacturing output last month. Motor vehicle production surged 4.3% in August 2018.
Industrial production in USA was up 0.3% last month after an unrevised 0.4% growth in August 2018. Industrial output grew at a 3.3% annualized rate in the third quarter after accelerating at a 5.3% pace in the second quarter.
Mining production grew 0.5% adding to the 0.4% rise in August 2018. Oil and gas well drilling, however, fell for a third straight month in September 2018. Utilities output remained unchanged in September after surging 1.1% in the previous month. Capacity utilization for the industrial sector also remained unchanged at 78.1%. Key index closed higher on Monday, 15 October 2018, on positive earnings. The Sensex gained 131.52 points to close at 34865.1.
Key index advanced on Tuesday, 16 October 2018, on buying of equities. The Sensex was up 297.38 points to close at 35162.48.
Key index fell on Wednesday, 17 October 2018, on rising US-China trade war cues. The Sensex plunged 382.9 points to close at 34779.58.
The Indian stock markets were closed on Thursday, 18 October 2018, on account of Maha Navami and Dussehra. Key index settled lower on Friday, 19 October 2018, on a sell-off by foreign funds. The Sensex tanked 463.95 points to close at 34315.63.
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.