The Indian stock market is likely to open on a positive note on Wednesday, September 16, after benchmark indices fell more than 1 per cent in the previous session. Gift Nifty was trading around 23,240.50, up nearly 40 points from the previous close of Nifty futures, signalling a positive start for the domestic equity benchmarks.
The opening gains, however, are likely to be tested by global cues, with the US Federal Reserve’s interest-rate decision emerging as the key event for markets today.
On Tuesday, September 15, the 30-share Sensex fell 778 points, or 1.04 per cent, to close at 74,003.82, while the NSE Nifty 50 declined 280 points, or 1.19 per cent, to settle at 23,118.60.
Fed decision to set tone for global markets
Zee Business Managing Editor Anil Singhvi said Wednesday could be a “make or break” day for global markets as investors await the US Federal Reserve’s interest-rate decision.
According to Singhvi, markets are widely expecting a rate hike, while US bond yields above 5 per cent are already reflecting expectations of higher interest rates.
He said the Fed’s decision could create a difficult situation for US President Donald Trump and financial markets. A rate hike could disappoint Trump, while a decision to keep rates unchanged could upset markets that are expecting tighter monetary policy.
The reaction of US markets after the Fed decision will be crucial in determining the direction of global markets, Singhvi said.
Key factors to watch today
Despite the positive indication from Gift Nifty, several factors could keep Indian equities volatile.
Crude oil prices remain elevated, with little indication of a meaningful decline in the near term. Singhvi said that continued weakness in US markets and expectations of a rate hike could also weigh on sentiment.
He said that foreign institutional investor selling has increased, while the rupee ended at a three-month low. India VIX has also seen a sharp rise over the past two sessions, signalling higher volatility.
The sharp decline in mid-cap and small-cap stocks has further weakened overall market sentiment.
UPI framework: Paytm, Yes Bank in focus
The government’s new framework for UPI transactions could also keep select stocks in focus.
Under the new framework, UPI peer-to-peer (P2P) transactions will not attract any charges. For person-to-merchant (P2M) transactions above Rs 2,000, a 0.4 per cent merchant discount rate (MDR) has been proposed.
For transactions above Rs 75,000, the MDR will be capped at Rs 300. Sectors such as railways, telecom and fuel will have a flat MDR of Rs 5.
Transactions involving mutual funds and stock payments will attract an MDR of 0.02 per cent, capped at Rs 300. Small merchants with QR collections of up to Rs 1 lakh will continue to have zero MDR.
UPI apps will also not be allowed to charge a separate platform fee. The new framework will come into effect from October 15.
Paytm share price: What Anil Singhvi said
Singhvi described the UPI framework as highly positive for Paytm, saying the company’s core UPI business could generate EBITDA of around Rs 1,000-1,200 crore.
He said the framework could also strengthen investor confidence in the company, its promoters and its business model.
However, Paytm shares have already rallied significantly on expectations of MDR charges. Singhvi therefore does not expect an immediate sharp rise in the stock in the short term.
For long-term investors, he sees the development as positive.
Pine Labs could see some pressure
The MDR cap could have a somewhat negative impact on Pine Labs, Singhvi said.
The market had already anticipated the introduction of MDR charges, and both Paytm and Pine Labs had seen significant rallies ahead of the announcement. This could limit the immediate reaction in the two stocks.
Yes Bank could benefit from MDR
Yes Bank could also benefit from the introduction of MDR charges, according to Singhvi.
A significant portion of the bank’s business is linked to UPI transactions. The introduction of MDR could therefore support the bank’s profitability and potentially improve its profit before provisions, Singhvi said.
