Indian market remains on positive side as domestic and international investors continue investing for second consecutive day since tax cut announcement. INR/USD is expected to trade around 70.60 – 70.85 levels today. Indian Rupee continues to strengthen further on positive outlook of Indian market, find further forecast and analysis below:
Ease on Crude Oil Prices
Saudi Arabia is set to fully restore its oil production by next week. This is good news since drone attack on ARAMCO Oil facilities on September 14th 2019 sent the oil prices soaring throughout the world. However, crude oil futures ended higher in account of tensions in the Middle East.
Equity Market
The considerable corporate tax reduction announced by Finance Minister, Nirmala Sitharaman, sent the domestic equity market to bulls. Stocks of banking sector rallied significantly since the announcement. HDFC and ICICI bank gained the most reaching 52 weeks high. Sensex opened today at 39,142.74 and NIFTY opened at 11,613.60. FMCG sector benefitted too since the reduction in GST on catering services and hotel rooms from 18% and 28% to 5% and 18% respectively.
US Federal Reserve Meet
Experts anticipate Rate Cut by 25 basis points (bps) due to rising inflation in US. Federal Reserve is set to meet next week to continue its economic growth streak amid global recession concerns, trade war with China and Saudi Oil attack geo political crisis.
Fiscal Deficit
Government reduced corporate tax by estimated USD 20 Billion. This will have a negative impact on fiscal deficit and further on GDP. There is no clarity whether the Indian Government will be financing the deficit that will further lead to scrutinizing increased government borrowings. How the government will cope with the 20 billion dollars’ worth of revenue loss is a matter of concern.
Increased Foreign Fund Inflows
Indian market looks appealing again to global investors as foreign fund inflows have increased since Corporate Tax Cut announcement. Increased foreign inflows will have a positive impact on fiscal deficit and the balance of payments.
ING still anticipates INR/USD touching 73 level by the end of 2019.