Markets await earnings season
The Sensex declined 381.62 points to settle at 35695.10 while the Nifty closed at 10727.35 losing 132.55 points for the week that ended on Friday, 4 January 2019.
The IHS Markit Nikkei Manufacturing Purchasing Managers’ Index (PMI) plunged to 53.2 in December 2018 from 54 in November. Pollyanna De Lima, Principal Economist at IHS Markit, said “Output continued to rise strongly in line with a robust upswing in sales. Companies benefited from rising international demand for goods as export orders expanded for
the fourteenth straight month. Although new orders and output expanded at a slower rate last month, both have remained well into the expansion territory for more than a year supported by weaker inflationary pressures.” The IHS Markit Services PMI fell to 53.2 in December 2018 from 53.7 in November. “India’s service sector continued to enjoy positive levels of activity in December with new business and employment remaining on an upward path,” De Lima said. According to a CRISIL report, the share of private sector investments in India’s infrastructure sector hit a decadal low in FY18 with gaps in policy, project structures, institutional capacity and contracts leading to a spike in stalled projects and debt levels and a dip in the investment momentum. New project investments have been the lowest in 12 quarters at about
Rs.1 lakh crore for Q3FY19, indicating a slowdown in the
While the pace of ordering had improved in the last two quarters, capital goods and heavy engineering majors find the operational environment in India to be challenging. The RBI’s decision to allow a one-time restructuring of some loans to small businesses is bound to foster indiscipline among borrowers. K. Gupta, Associate Director at India Ratings, said “This dispensation may encourage some of the MSME borrowers which are otherwise operating satisfactorily to opt for the scheme and impair the credit discipline”.
The relief to small businesses was Shaktikanta Das’s first big policy move as a RBI Governor and surprisingly came a day after the RBI’s financial stability report which warned that the sector was contributing to an outsized growth in soured loans among state-run banks. The move has been roundly criticized by most analysts. “The inherent weakness in operations of SMEs may still play out and manifest after the period of reprieve is over. Such relief offered in the past has not led to any material improvement in asset quality for the sector as these companies’ cash flows remain under pressure,” Gupta added.
On China’s economic scenario, the Caixin/Markit Manufacturing PMI tumbled to 49.7 in December 2018 from 50.2 in November, marking the first contraction since May 2017 as domestic and export orders continued to weaken. China’s
official manufacturing PMI fell to 49.4 in December 2018 from 50 in November whereas China’s official nonmanufacturing PMI rose marginally to 53.8 in December 2018 from 53.4 in November. The US Federal Reserve (US Fed) raised its benchmark interest rate by a quarter-point to 2.5% from 2.25%. It said that the central bank will continue trimming its balance sheet by $50 billion each month leaving open the possibility that continued strong data could force it to raise rates to the point where they start to brake the economy’s momentum. Key index edged lower on Monday, 31 December 2018, on negative cues. The Sensex closed 8.39 points lower at 36068.33.
Key index advanced on Tuesday, 1 January 2019, on fresh buying by foreign funds. The Sensex closed 186.24 points higher at 36254.57.
Key index tumbled on Wednesday, 2 January 2019. The Sensex closed 363.05 points lower at 35891.52. Key index plunged on Thursday, 3 January 2019, on US-China trade war cues. The Sensex closed 377.81 points lower at 35513.71.
Key index settled higher on Friday, 4 January 2019, on buying of stocks. The Sensex closed 181.39 points higher at 35695.1.
National and global macro-economic figures will dictate the movement of the markets and influence investor sentiment in the near future. On the Rupee scenario, market participants will closely watch the Indian rupee trend against the US Dollar. The government will release data based on WPI and CPI for urban and rural India for December 2018 by midJanuary 2019. The RBI’s next monetary policy review meet is scheduled on 5 February 2019.