Global concerns hit markets
The Sensex fell 476.14 points to settle at 34981.02 while the Nifty closed 155.45 points lower at 10526.75 for the week that ended on Thursday, 22 November 2018. India’s exports rose 17.86% to $26.98 billion in October 2018 while imports rose 17.62% to $44.11 billion leading to widening of trade deficit to $17.13 billion on account of higher oil imports bill. The trade deficit widened despite a steep decline of 42.9% in gold imports to $1.68 billion. During April-October 2018, exports rose 13.27% to $191 billion while imports rose 16.37% to $302.47 billion leaving a trade deficit of $111.46 billion. Crude oil imports in October 2018 rose 52.64% to $14.21 billion. The non-oil imports were up 6% at $29.9 billion in the same month. India’s industrial output in September 2018 grew 4.5% from a year earlier. Fitch ratings agency has retained its sovereign rating for India at BBB-, the lowest investment grade with a stable outlook, stating that a weak fiscal position continues to constrain the ratings and there were significant risks to the macroeconomic outlook. Fitch had last upgraded India’s sovereign rating from BB+ to
BBB- with a stable outlook on 1 August 2006.
The Government of India (GoI) has made a strong pitch to Fitch for an upgrade after rival Moody’s Investors Service in November 2017 gave India its first sovereign rating upgrade since 2004. Fitch believes that the Indian economy continues to exhibit some structural weaknesses relative to peers and is less developed on a number of metrics. It has raised the real GDP growth in the current financial year to 7.8%, up from 6.7% in FY18.
“This forecast is however subject to downside risks from tightening financial conditions, weak financial-sector balance sheets and high international oil prices. We forecast growth to decelerate to a still-strong 7.3% in both FY20 and FY21 for the same reasons,” Fitch said in its report.
Fitch expects current account deficit (CAD) to widen to 3% in FY19 and 3.1% in FY20 from 1.9% in FY18. On the US Federal Reserve front, the Federal Open Market Committee (FOMC) unanimously approved keeping the federal funds rates unchanged in a range of 2-2.25%. There was no mention of the volatility that has gripped the financial markets since mid-October 2018. The committee noted that the unemployment rate has declined since the September meeting. The US Federal’s statement also noted that the growth of business fixed investment has moderated from its rapid pace earlier in the year.
Key index advanced on Monday, 19 November 2018, on buying of equities by the FIIs. The Sensex was up 317.72 points to close at 35774.88.
Key index plunged on Tuesday, 20 November 2018, on global cues. The Sensex was down 300.37 points to close at 35474.51.
Key index fell on Wednesday, 21 November 2018, on profit-booking by market participants. The Sensex was down 274.71 points to close at 35199.80.
Key index corrected on Thursday, 22 November 2018, on selling-off equities. The Sensex was down 218.78 points to close at 34981.02.
The Indian stock markets remained closed on Friday, 23 November 2018, on account of Guru Nanak Jayanti. National and global macro-economic figures, Brexit and other events will dictate the movement of the markets and influence investor sentiment in the near future. Market participants will closely watch the trend of the Indian rupee against the US Dollar, which is currently hovering around 71-72 levels.
On the global front, the Danish Central Bank (DCB) will publish its quarterly financial stability report on Friday, 30 November 2018. The Reserve Bank of Australia (RBA) is scheduled to hold its interest rate and financial stability meet next month on Wednesday, 5 December 2018.