Published on 24/11/2017 9:48:51 AM | Source: LKP Securities Ltd
Markets to get a cautious start on sluggish regional cues - LKP Sec
Domestic Market View
Markets to get a cautious start on sluggish regional cues
The Indian markets extended their gaining streak in the last session, led by buying in some bluechips and on hopes that economic growth will pick up momentum on reforms initiatives. Today, the start is likely to be a bit cautious on sluggish regional cues. Though, some support will come with a private report stating that the slowdown in the economy has bottomed out, and going forward, the pace of recovery will depend on initiatives the government takes to boost the growth momentum, especially private investment. Also, the Union minister Suresh Prabhu has said that the commerce and industry ministry is chalking out a "proper" business plan based on market research in its bid to promote exports of goods and services. He added that a proper market segmentation is the need of the hour to understand the potential of domestic goods and services. Traders will also be getting some support with Sebi’s plan to ease takeover rules to speed up the resolution of insolvency proceedings for stressed companies as local lenders seek to recover about Rs 9 lakh crore from entities rendered unviable by the mounting debt pile. Meanwhile, President Ram Nath Kovind has approved an ordinance to introduce changes to the Insolvency and Bankruptcy Code which is aimed at tightening the current framework amid rising number of insolvency cases. There will be some buzz in PSU oil companies, as the government has exempted the merger of oil and gas PSUs from the purview of competition watchdog CCI.
Domestic Market Overview
Markets end in green for sixth straight session; eke out slender gains
Indian equity benchmarks managed to keep their head above water and went home with slender gains, extending their winning streak to sixth day. Markets started with caution but gradually gained momentum and traded with traction in first half of the session, as traders took some support with rating agency Moody’s latest report where it expecting a n improvement in the credit profiles of India Inc next year, driven by better sales as it expects GST-related disruptions to wane, leading to an all-round recovery in economic activities. Some support also came with NITI Aayog vice-chairman Rajiv Kumar’s statement that India GDP growth rate in Q2 is likely at 6.2-6.3% and for the full year could be closer to 7% and for Second-half growth has to be 7.5%. The Budget for 2018-19 should focus on the social sector and an attempt should be made to provide universal health insurance cover to citizens. Markets also find some support with private report highlighting that Corporate India witnessed significant deal activity in the September quarter this year, as private equity invested $8.7 billion and M&A transactions attracted $2.1 billion. The investment of private equity and venture capital increased 180 percent in value terms over the last year to reach $8.7 billion in the JulySeptember quarter of 2017.
However, markets took U-turn and entered into red terrain with traders turning cautious on the back of rally in oil prices which continued to reduce expectations of rate cuts ahead of the Reserve Bank of India’s policy meeting early next month. Traders took note on report that the government is likely to tighten the Insolvency and Bankruptcy Code (IBC) through an ordinance to ensure that wilful defaulters and promoters of companies in loan default over an extended period of time won’t be able to get their hands back on assets during the resolution process. Also, there will be buzz with the Cabinet giving its nod for constitution of the 15th Finance Commission that will decide the taxsharing formula between the Centre and states for five years beginning FY21. Its recommendations will have to be in place before April 1, 2020. Though, recovery in last leg of trade helped markets to end marginally in green.
Shares of insurance companies declined after the Finance Ministry formed a task force to study and submit a report on redrafting of the direct tax code within six months. Mixed reactions were displayed in aviation stocks. In order to provide a major boost to air connectivity in the Northeast, 92 new routes will be opened in the region in the second round of the government’s ‘Udaan’ scheme. Separately, passengers should brace themselves for a fare increase, as the government is likely to raise the passenger services fee (PSF) by at least 38% to meet the cost of security at Indian airports.
Global Market Overview
Asian markets end mostly in red on Thursday
Asian equity markets ended mostly in red on Thursday, taking the lead from a quiet overnight session on Wall Street as investors parsed through minutes from the US central bank. Hong Kong stocks ended sharply lower, with the benchmark Hang Seng falling back below the 30,000 point mark after the previous session’s breakthrough, as a tumble in mainland stocks soured sentiments. Further, Chinese shares ended lower, with the blue-chip index suffering its worst fall in nearly 1-1/2 years as worries about a selloff in the bond market bled into equities. Meanwhile, Japanese markets were closed for a public holiday.
US markets remained closed on account of Thanksgiving Day holiday
The US markets remained closed on Thursday on account of ‘Thanksgiving Day’ holiday.
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