Post Session: Quick Review

Indian equity benchmarks traded in red for most part of the day on Friday and sharp selloff in last hour of trade largely forced the markets to close at day’s low, as Budget proposals failed to cheer investors sentiment. The market opened on a positive note, taking support from Former Finance Minister Arun Jaitley’s statement that Indian economic growth graph was on an upward trajectory after past policy uncertainties have been replaced by certainties. Adding some optimism Chief Economic Adviser K V Subramanian said India needs to accelerate investment in excess of 35% of the GDP to achieve 8% sustained growth which is essential for becoming a $5 trillion economy by 2024-25.

However, the gains were quickly pared, and key indices began the downtrend as the US dragged India to the WTO by filing a complaint against New Delhi's move to increase customs duties on 28 American goods, alleging the decision is inconsistent with the global trade norms. The US has stated that India does not impose these duties on like products originating in the territory of any other WTO member nation. Markets extended their fall in late afternoon session, as sentiment on the street weakened further with Moody's statement there are risks of India missing 3.3 per cent fiscal deficit target for the current financial year if tax revenue falls short of projection. The Budget 2019-20 lowered fiscal deficit projection for the current financial year to 3.3 per cent from 3.4 per cent targeted in the Interim Budget 2019-20 in February.

On the global front, Asian markets ended mixed on Friday, while European markets were trading in red as investors awaited the US jobs report later in the day for cues on Federal Reserve's stance on rate cuts.  Back home, Retail stocks ended lower after Finance Minister has proposed local sourcing norms to be eased for single-brand retail FDI. However, Stocks related to Housing finance ended higher after Finance Minister has proposed setting up 1.95 crore houses under Pradhan Mantari Awas Yojna (PMAY). 

The BSE Sensex ended at 39491.69, down by 416.37 points or 1.04% after trading in a range of 39441.38 and 40032.41. There were 5 stocks advancing against 26 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 1.56%, while Small cap index was down by 1.44%.(Provisional)

The few gaining sectoral indices on the BSE were Telecom up by 0.20%, FMCG up by 0.09% and Bankex up by 0.03%, while Metal down by 3.87%, Realty down by 3.71%, Power down by 3.69%, Auto down by 3.15% and Basic Materials down by 2.70% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Indusind Bank up by 2.31%, Kotak Mahindra Bank up by 1.26%, Bharti Airtel up by 0.92%, SBI up by 0.78% and ITC up by 0.67%. (Provisional)

On the flip side, Yes Bank down by 8.68%, NTPC down by 4.92%, Mahindra & Mahindra down by 4.90%, Sun Pharma down by 4.36% and Vedanta down by 4.32% were the top losers. (Provisional)

Meanwhile, in order to achieve the objective of becoming a $5 trillion economy by 2024-25, Chief Economic Adviser (CEA) KV Subramanian has said India needs to sustain a real Gross Domestic Product (GDP) growth rate of 8 percent. He added that to achieve this growth rate the country needs to accelerate investment in excess of 35 percent of the GDP. Besides, India's economic growth is expected to rebound from a five-year low to 7 percent this year (FY20).

He said ‘the investment as percentage of GDP has to be in excess of 35 percent. In fact, China for instance reached 50 percent of GDP. Definitely, we need to invest close to 35 percent.’ Currently, the country's investment level as percentage of GDP is 29.3 percent. He also said ‘From 29-odd if we get to mid-30s we will really get into virtuous cycle and then we need to sustain at that level’.

Subramanian further said international experience, especially from high-growth East Asian economies, suggests that such growth can only be sustained by a ‘virtuous cycle’ of savings, investment and exports catalysed and supported by a favourable demographic phase. Investment, especially private investment, is the ‘key driver’ that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction, and generates jobs.

The CEA added that exports must form an integral part of the growth model because higher savings preclude domestic consumption as the driver of final demand. Similarly, job creation is driven by this virtuous cycle. He added that when examined across the entire value chain, capital investment fosters job creation as the production of capital goods, research and development and supply chains generate jobs.

The CNX Nifty ended at 11801.40, down by 145.35 points or 1.22% after trading in a range of 11797.90 and 11981.75. There were 6 stocks advancing against 44 stocks declining on the index. (Provisional)

The top gainers on Nifty were Indiabulls Housing Finance up by 3.42%, Indusind Bank up by 2.14%, Kotak Mahindra Bank up by 1.22%, ITC up by 0.97% and SBI up by 0.64%. (Provisional)

On the flip side, Yes Bank down by 8.62%, NTPC down by 4.84%, Mahindra & Mahindra down by 4.75%, UPL down by 4.49% and Sun Pharma down by 4.30% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 22.67 points or 0.3% to 7,580.91, France’s CAC decreased 17.04 points or 0.3% to 5,603.69 and Germany’s DAX decreased 27.15 points or 0.21% to 12,602.75.

Asian markets ended mixed on Friday as investors awaited the US jobs report later in the day for cues on Federal Reserve's stance on rate cuts. US employment is expected to increase by 160,000 jobs in June after an increase of 75,000 jobs in May. The jobless rate is expected to hold at 3.6 percent. The report could determine if the Federal Reserve cuts rates later this month to shore up the world's largest economy as trade tensions escalate. Meanwhile, trading volumes remained subdued across the region amid a holiday in the US overnight for the Independence Day. Japanese shares ended higher on hopes for progress in US-China trade talks.