FIIs book prof­its

Money Times - - Market Review - By Deven­dra A Singh

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.

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