Markets likely to get cautious start ahead of policy rate decisions by US Fed

Indian markets extended gains to second consecutive day and ended higher on Tuesday led by gains in telecom, auto, and construction stocks. Today, markets are likely to get cautious start ahead of crucial policy rate decisions by the US Federal Reserve later in the day. Surge in crude oil prices likely to dent sentiments in the domestic markets. Oil prices rose as the industry continued to survey the impact of Hurricane Francine on output in the US Gulf of Mexico. Traders will be concerned as India’s trade deficit widened to a 10-month high of $29.7 billion in August as imports hit a record high of $64.4 billion on doubling of gold inflows, and exports contracted for the second month in a row to $34.7 billion due to softening of oil prices and muted global demand. Besides, think tank GTRI said the contraction of petroleum product exports by 37.56 per cent to $5.95 billion in August is linked to the ongoing disruptions in the Red Sea. However, foreign fund inflows likely to aid sentiments. The foreign institutional investors (FIIs) bought equities worth Rs 482 crore on September 17. Some support may come later in the day with a private report that the Centre’s direct tax collection collections, net of refunds, rose about 16% on year to Rs 9.92 lakh crore till September 15, 2024 in the current financial year. The direct tax receipts till September 15 were 45% of the FY25 target of Rs 22.07 lakh crore, broadly in line with annual trends. Traders may take note of Crisil Ratings’ statement that the recent developments in Bangladesh did not have a significant impact on India's trade and it does not foresee any near-term impact on the credit quality of India Inc. Meanwhile, India and the UK are expected to hold the next round of talks for a proposed free trade agreement in October to resolve the pending issues and close the negotiations. Oil & gas sector stocks will be in focus as the government slashed windfall tax on domestically produced crude oil to nil per tonne with effect from September 18. The government, on August 31, slashed windfall tax on domestically produced crude oil to Rs 1,850 per tonne from previous Rs 2,100 per tonne.

The US markets ended mostly in green on Tuesday, after hitting record highs, as strong economic data allayed fears of a slowdown and investors braced for the Federal Reserve's expected move to cut interest rates for the first time in more than four years. Asian markets are trading mixed on Wednesday as the Bank of England (BoE) and the Bank of Japan (BOJ) are scheduled to meet this week to discuss monetary policy.

Back home, Indian equity benchmarks ended marginally higher on Tuesday supported by firm global trends ahead of the much-awaited US Fed's decision on interest rates. Markets made a cautious start amid foreign fund outflows and higher crude oil prices. As per NSE data, Foreign Institutional Investors (FII) were net sellers of Indian equities worth Rs 1,634.98 crore. Some cautiousness also came in with Reserve Bank of India Governor Shaktikanta Das’ statement that the benchmark interest rate in the country will hinge on the future trajectory of inflation. However, markets entered into green terrain in late morning deals and managed to keep their heads above water throughout the day as inflation based on wholesale price index (WPI) in India slowed down in the month of August 2024 to 1.31% from 2.04% in July, amid easing prices of crude petroleum, natural gas and food articles. Some support also came with Finance Minister Nirmala Sitharaman’s statement that the Union Government has kept the interests of the middle class in mind while formulating tax rates, and is constantly trying to keep it simpler while giving more options to them via the new tax regime. Traders also took a note of Prime Minister Narendra Modi’s statement that India is becoming a major stakeholder in the global supply chain and this growing capacity is the foundation of the country’s economic growth. He added innovation and collaboration are India’s greatest strengths on its development journey. Finally, the BSE Sensex rose 90.88 points or 0.11% to 83,079.66, and the CNX Nifty was up by 34.80 points or 0.14% to 25,418.55.