Volatility Will Be The Name Of The Game From Hereon
The comment from the US President Donald Trump that he would delay an increase in tariffs on the Chinese goods following “substantial progress” in trade talks gave the much-needed ammunition to investors to ramp-up buying and, as a result, the bulls made a thumping start to the week. As things looked high-spirited on the D-street, there came a twist in the tale and the villain in the next two trading sessions was the sharp rise in the volatility in the markets. The VIX went above the 19 level as border tensions between India and Pakistan played spoilsport. The correction in the indices may not have been too sharp, but certainly the intra-day volatility has been quite high with the Sensex losing about 600 points from high to low.
Apart from the escalating geopolitical tensions between the two neighbouring nuclear powers, India and Pakistan, other news which grabbed the eyeballs pertained to the realty sector, which got a booster shot as the GST Council deciding to slash the GST rates on under-construction apartments or projects and on affordable housing. Also, the disbursal of the first tranche of the recently announced PM-Kisan Yojana was rolled out. Additionally, providing the first important input for the agricultural sector, the private sector SKYMET predicted a normal monsoon in 2019. The quantum and spread of monsoon will be the key to India’s annual Kharif output. A bumper Kharif output is essential for keeping food inflation in check and also to ensure that the farm incomes are sufficient to trigger demand from rural and semi-urban areas. The Reserve Bank of India took three banks out of its restrictive PCA framework. Taking these banks out of the PCA framework will result in removing the constraints placed on these banks in terms of lending and branch expansion. Meanwhile, the Centre’s fiscal deficit stood at Rs 7.71 lakh crore in April-January FY2019, which is 121.5 per cent of the overall budget deficit estimate for FY2019. In other development, the Index Maintenance Sub-committee (IMSC) of NSE decided to replace oil marketing company HPCL with Britannia Industries on the flagship Nifty50. The changes will be effective March 29.
On the global scenario, Wall Street was seen trading with a cautious approach on the back of host of events and announcements. Federal Reserve Chairman Jerome Powell testified in his two-day semi-annual testimony to both houses of the Congress on the central bank’s monetary policy. Powell reiterated that the Fed will remain patient in determining further adjustments to interest rates, given the uncertainty over the economic outlook. On the other hand, optimism surrounding the US-China trade relations was seen fading as the US trade representative Robert Lighthizer cooled investors hopes of the US and China reaching a trade deal, suggesting there was still more work to be done .
Overall, if the economic calendar is any indication and considering events in the pipeline, the coming week is likely to be full of hustle and bustle as a deluge of market-moving reports from the domestic markets are lined up for release. Some of these reports include India’s third quarter GDP numbers, fiscal deficit, infrastructure output numbers for January, India’s Nikkei Manufacturing PMI and Nikkei Services PMI for the month of February along with auto sale figures. On top of it, the developments along the border between India and Pakistan will be closely watched by anxious investors. On the global front, all eyes will be on the outcome of the second summit between Kim and Trump, which got underway since Wednesday. Also, the development on Brexit front will continue to keep investors on their toes.
