Benchmarks likely to make cautious start amid global growth concerns

Extending northward journey for third straight session, Indian markets ended higher with gains for over half a percent on Wednesday on sustained buying mainly in finance, energy and metal counters. Today, the markets are likely to make a cautious start, tracking weak cues from global markets amid growth concerns. The Organisation for Economic Co-operation and Development (OECD) has lowered its 2019 forecast for global economic growth to 3.3 per cent for this year, down from the 3.5 per cent it predicted in November, which was itself a downgrade from a previous 3.7 per cent. It added that high policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown. On the domestic front, traders will be cautious with a private report stating that the likelihood of Indian GDP growth coming at below 7 per cent in 2019-20 is very high despite aiding factors like low oil prices and an expansionary budget. It added that global slowdown, tight financial conditions and political uncertainty in the election year will be the biggest headwinds for growth. However, traders may get some support later in the day with report that the income tax (I-T) department has notified the modified norms for startups to enable them to seek angel tax exemption for investments of up to Rs 25 crore. The modified norms, which are aimed at encouraging budding entrepreneurs, will be effective retrospectively from February 19, when the Department for Promotion of Industry and Internal Trade (DPIIT) relaxed the norms for startups. Meanwhile, India is exploring various options, including approaching the WTO dispute body, to deal with the US decision to withdraw import incentives for about 2,000 domestic goods under the trade preference scheme. There will be some reaction in wind energy sector stocks with Crisil Research’s report that the country's wind energy sector is likely to see a slow growth with regard to capacity addition over the next five years. It added that the shift to a competitive bidding mechanism has slowed industry growth due to a significant fall in tariffs, triggering a decline in both bid response and profitability for original equipment manufacturers (OEMs).

The US markets ended in red territory on Wednesday as investors stayed on the sidelines, awaiting fresh developments on trade. Asian markets are trading mostly lower on Thursday as global growth concerns resurfaced and investors also awaited some kind of resolution to Sino-US trade negotiations.

Back home, bulls held onto gains for third straight session on Wednesday, with key Indian equity benchmarks closing the day with gains of over half a percent. Markets made a cheerful start, aided by the Reserve Bank of India’s (RBI) statement that it would infuse Rs 12,500 crore into the financial system on March 07, 2019. The purchase will be made through open market operations (OMOs). The market participants remained optimistic with the Union Minister for Finance and Corporate Affairs, Arun Jaitley’s statement that the Government is committed to facilitate trade and industry in the country so that the momentum of the growth continues to move-up. He also said that the process of reforms in case of direct and indirect taxes will continue in order to facilitate and further expedite the process of ease of doing business in the country. Adding some comfort, Commerce Secretary Anup Wadhawan said that the US decision to withdraw duty benefits on Indian products under the Generalized System of Preferences (GSP) programme will not have a significant impact on exports to America. Key indices kept their heads in positive territory during the whole day, amid reports that the government introduced a scheme for providing financial assistance for transport and marketing of agriculture products with a view to boosting export of farm commodities to certain countries in Europe and North America. Traders took support with the Federation of Indian Chambers of Commerce and Industry (FICCI) President Sandip Somany’s statement that the government has promised to lower corporate tax rate to 25% for all companies once Goods and Services Tax (GST) mop-up improves. Investors paid no heed towards the Centre for Monitoring Indian Economy’s (CMIE) latest report showing that the unemployment rate in India rose to 7.2% in February 2019, the highest since September 2016, and up from 5.9% in February 2018. The unemployment rate has climbed despite a fall in the number of job seekers. Finally, the BSE Sensex surged 193.56 points or 0.53% to 36,636.10, while the CNX Nifty was up by 65.55 points or 0.60% to 11,053.00.