Markets may continue to see sell-off, focus on fiscal deficit data this week

The markets are likely to focus on the possibility of a trade war brewing between the world’s two largest economies, the United States and China, domestic macro data and action in the initial public offering (IPO) segment in the truncated week ahead. The Indian markets will be shut on Thursday and Friday.

After the meltdown in markets last week, selling pressure is expected to continue this week as global trade war scare intensified following US President Donald Trump’s protectionist measures against China. According to Jimeet Modi, founder and chief executive officer, Samco Securities, with the fears of trade war aggravating and political climate heating up domestically, there is bound to be acute pressure on the bulls from medium term perspective. “Year-end liquidity crunch would keep investors at bay but beginning new financial year liquidity should improve and the same would be reflected in the markets too. Mutual funds inflow on account of ELSS (equity-linked savings schemes) should boost their buying power thus lending support to the market,” he said.

In addition to weak global cues, the domestic market is underperforming due to premium valuation, profit booking led by long-term capital gains (LTCG) tax and pre-election political uncertainties, said Vinod Nair, head of research at Geojit Financial Services. Nair expected domestic chaos to stabilize by the end of FY18, as redemption pressure will be over. “But due to risk of escalation in global trade war and domestic pre-election uncertainties, volatility may continue for some more time. The week ahead is truncated with two market holidays and F&O (futures and options) expiry adding volatility,” he added.

The March 2018 F&O contracts will expire on Wednesday. Generally volatility increases as traders roll over positions in the F&O segment to the next month’s series.

In the primary markets segment, IPO of hospitality chain Lemon Tree Hotels Ltd (LTHL) will open for subscription on Monday. The Rs1,039-crore issue, which will close on 28 March, has set a price band of Rs54-56 per share for the share sale.

Private lender Bandhan Bank will make stock market debut on Tuesday. The issue, which was subscribed 14.6 times, aims to raise Rs4,500 crore through the share sale.

Meanwhile, the government will release India’s fiscal deficit till February on Wednesday. India’s fiscal deficit touched Rs6.77 trillion at the end of January, 113.7% of the target for the entire financial year, on account of higher expenditure. Fiscal deficit, a reflection of government borrowings to meet revenue-expenditure gap, was 113.7% in the 10-month period of 2017-18 as compared to 105.7% in the year-ago period.livemint

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