3.2% fiscal deficit goal likely for FY19

A fiscal slippage in FY18 will likely result in the government opting to go for a wider gap for 2018-19 in the upcoming budget, according to foreign lender DBS on Thursday.

The fiscal deficit number for 2017-18 will come at 3.5 per cent against the targeted 3.2 per cent of the GDP (gro­ss domestic product) and it will result in the government opting to settle for a target of 3.2-3.3 per cent rather than the 3 per cent under the fiscal consolidation roadmap.

Budget likely to focus on rural economy, say experts

As the NDA government gets ready to present its last full budget, the market players have started placing bets on the stocks and sectors that are likely to be impacted by the Union budget. All eyes are now on the first post-GST budget which is likely be presented on February 1, 2018. “The next budget is expected to be focused on improving the rural economy and would be an ideal opportunity for the government to set its road map for alleviating rural distress,” said Arun Thukral, managing director, Axis Securities.

Better Q3 Numbers Seen for Key Sectors

The dynamics of the equity market is largely determined by corporate earnings. And the December quarter earnings season is set to kick off now, with top software exporters announcing their numbers in the coming fortnight.

India Inc’s Q3 performance is expected to show signs of improvement with the ill-effects of GST implementation coming down and better demand conditions prevailing in urban and rural markets on the back of an early festive season and improved consumer demand.

Equity indices hit record high for third day in a row

The global equity market touched a record high as stocks gained for a third straight day in the New Year.

The FTSE All World index rose 1.7 per cent in the New Year, extending the 2017 gain of 22 per cent, while the Dow Jones Industrial Average rose above 25,000 mark and S&P 500 made further gains.

Rupee at 30-mth high; yen, won, baht do even better

The rupee on Thursday appreciated to 30-month high of 63.41 against the dollar, tracking gains in local equity market. Analysts expect the local currency to strengthen towards 62-level by month-end on strong foreign inflows in domestic stocks and foreign direct investment (FDI).

Forex experts said that exporters are unlikely to be impacted significantly by a stronger rupee, as global currencies have appreciated much more than the local unit.

10-year bond yields may shoot up to 7.5-8% range

The 10-year G-sec yields have risen by almost 85 basis points to 7.4 per cent over the past 13 weeks, making bond traders cautious.

Apart from fiscal developments, inflationary concerns, high oil prices and rising US rates may make the Reserve Bank of India (RBI) settle into a long pause.

The ten-year bond yields have risen to 7.4 per cent this month, back to July 2016 highs and up around 90 basis points in 2017, compared to relatively flat movements in the region (ex-India and China).

Moody’s: Recap to narrow gap between public & pvt lenders

The gap between the capital profiles of Indian public and private sector banks is expected to narrow.

This follows the government’s proposed Rs 2.11 lakh crore recapitalisation plan for public sector banks (PSBs), which are financially weaker entities, said Moody’s Investors Service on Thursday.

As of September 2017, the average common equity tier 1 (CET1) ratio of rated public sector banks was 8.7 per cent compared to 12.2 per cent for the rated private sector banks.

However, the gap is expected to narrow, given the government’s recapitalisation package.

Maharashtra bandh turns violent; rail, road traffic hit

The day-long Maharashtra bandh to protest the violence post an event to mark 200th anniversary of Bhima Koregaon battle, was called off on Wednesday evening. Bharipa Bahujan Mahasangh leader and Dalit icon BR Ambedkar's grandson Prakash Ambedkar, who had called the bandh, told reporters that nearly 50 per cent of the state’s population took part in the shut-down. Road blockades, arson and stone-pelting incidents were reported in Mumbai and elsewhere during the day. However, Ambedkar, claimed that the bandh was peaceful. 

RBI may announce OMO purchase next week to cool yields

Bond traders and investors expect the Reserve Bank of India to announce purchase of securities under its open market operation (OMO) next week to provide some respite to the yields amid weak appetite.

"Liquidity is drying up and one segment of participants is speculating that RBI may announce OMO purchase in three tranches," said a bond trader with a foreign bank.

The pace and timing of OMO purchases will be reliant upon how the weekly auction pans out given the weak investor appetite, the trader said.