Benchmarks likely to make cautious start on Thursday

Indian markets ended in red on Wednesday after the Reserve Bank of India lowered the GDP growth forecast for current financial year to 6.9% from 7%. Today, the markets are likely to make a cautious start amid fall in crude oil prices. There will be some cautiousness as the Reserve Bank of India’s (RBI) consumer confidence declined in July as reflected in the current situation index (CSI); the future expectations index (FEI) fell by about 4 points. It added that consumers’ perceptions on the general economic situation and the employment scenario softened, while their assessment of their own incomes turned out to be less optimistic than in May 2019. However, traders may take note of report that with the RBI slashing the repo rate by 35 basis points, India Inc said its swift and full transmission by banks in the form of lower lending rates will be crucial to lift consumption and investment in the economy. Meanwhile, the Securities and Exchange Board of India (SEBI) has tightened the norms for pledging of shares by promoters of listed companies. In its circular, SEBI directed every listed firm to disclose detailed reasons for pledging of shares by its promoters along with the amount of stake pledged within two days if the total amount of shares pledged by the promoter or the promoter group crosses 50% of the total stake held by the promoter or if it is more than 20% of the concerned company’s total share capital. There will be some buzz in non-banking financial companies (NBFCs) stocks with report that taking cognizance of the precarious position of NBFCs, the Reserve Bank's Monetary Policy Committee (MPC) announced key measures to tackle the crisis-hit sector. These include setting up a central payments fraud registry to track the systems for frauds and increasing exposure limits for lending banks to single NBFCs to 20 per cent. The previous limit was 15 per cent of the bank’s Tier-I capital. There will be some reaction in power stocks with the Central Electricity Authority (CEA) data showing that fresh capacity addition in power has started on a sombre note. Out of the 1820 Mw envisaged to be added during April-June of this fiscal year, only 45 Mw has been added in thermal power generation. There will be some earnings announcements too to keep the markets buzzing.

The US markets ended mostly higher on Wednesday as investors turned more positive on the outlook for global growth amid central-bank moves to ease monetary policy. Asian markets are trading mostly in green on Thursday as investors mulled China’s daily currency fixing and a recovery in US equities overnight.

Back home, the Reserve Bank of India’s (RBI) repo rate cut decision failed to lift Indian equity benchmarks on Wednesday, as Sensex and Nifty closed sharply in red terrain. After starting a session on cautious note, markets traded volatile, as the National Council of Applied Economic Research (NCAER) in its latest report said that India's GDP growth is likely to be 6.2 per cent during the current fiscal, down from 6.8 per cent in 2018-19, on account of flat growth in agriculture sector. The prospects for agricultural sector in 2019-20 depend largely on the south-west monsoon. It added that the country as a whole has received 7 per cent below normal rainfall by August 5, 2019. It has also experienced temporal variations in rainfall. Traders failed to take any sense of relief with report that the RBI's monetary policy committee (MPC) reduced the repo rate by 35 basis points (bps) to 5.40 percent from 5.75 percent for fourth time in a row, to help revive the economy. In the second half of the session, indices extended losses to settle near their intraday low points, after the RBI lowered the GDP growth projection for 2019-20 to 6.9 per cent from 7 per cent forecast in the June policy, and underlined the need for addressing growth concerns by boosting aggregate demand. Investors were seen taking a note of Former RBI Governor Bimal Jalan’s statement that the government must borrow only long-term fund from the external market, and the quantum should not exceed 1.5 percent of Gross domestic product (GDP) under any circumstances. Jalan said that he does not have negative view about overseas sovereign borrowing, but he thinks India does not need to borrow from abroad. Finally, the BSE Sensex fell 286.35 points or 0.77% to 36,690.50, while the CNX Nifty was down by 92.75 points or 0.85% to 10,855.50.