Markets likely to make cautious start on Friday

Indian markets extended southward journey for third straight session and ended sharply lower with cut of over one and half a percent on Thursday tracking weak cues from other Asian markets amid concerns of a looming global economic slowdown. Today, the markets are likely to make a cautious start amid weakness in global markets. Traders will be concerned with report that Chief Economic Adviser (CEA) Krishnamurthy Subramanian virtually ruled out a major stimulus package for the economy, saying profit is private, losses are public is not good economics. He said sunrise and sunset phases for industry are usual and expecting the government to support industry in sunset phases can be morally hazardous. There will be some cautiousness as the International Monetary Fund (IMF) has raised questions regarding the NDA government’s revenue targets in the light of the below-trend revenue collections amid the worsening slowdown in the broader economy. Also, amid a slowdown in industry and agriculture, credit rating agency ICRA has estimated the GDP growth rate at 6% in the first quarter of the current financial year (Q1FY20). GDP growth rate in Q1 FY19 was 8%. There will be negative reaction on private report indicating that consumer confidence in India has declined by 3.1 percentage points in August compared to last month. However, some respite may come later in the day with Niti Aayog Vice Chairman Rajiv Kumar’s statement that the government is considering a number of measures which will be taken at an appropriate time to deal with financial stress and unleash animal spirit in the economy. Investors may take note of a report that the commerce ministry will soon come out with a new foreign trade policy, which provides guideline and incentives for increasing exports, for the next five financial years 2020-25. Meanwhile, traders' body CAIT has asked the finance ministry to extend the last date for filing annual GST return by two months to October 31. The last date to file the return is August 31. There will be some buzz in the auto stocks with report that with India's auto sales declining for the ninth straight month in July, more automotive manufacturers are laying off workers and temporarily halting production to keep costs in check. There will be some reaction in aviation stocks with the Directorate General of Civil Aviation’s data showing that air passenger traffic in India grew 3.1% in the first seven months of 2019-the slowest pace in at least five years-amid market uncertainties in a slowing economy and the grounding of Jet Airways (India).

The US markets ended mostly lower on Thursday after weaker-than-expected manufacturing data raised fresh worries over the health of the economy. Asian markets are trading mixed on Friday as uncertainty over how much further the Federal Reserve would cut rates added to the general air of caution in markets buffeted by global growth fears.

Back home, Indian equity markets continued their worst run on Thursday, with Sensex & Nifty crashing over 1.50% each. Key indices made a sluggish start of the day, impacted by Care Ratings’ report that the ongoing economic slowdown has started hurting corporates as well, with companies reporting a sharp decline in both revenue and profit growth numbers in the June quarter. India Inc's net sales growth for the June quarter slid to 4.6% as against 13.5% for the same period last year, while the net profit growth moderated to 6.6% as compared to last year's 24.6%. The street also remained worried, amid a private report that unemployment in India has shot up to a 3-year high of 8.3 per cent, as on August 20. With the urban unemployment rate close to 10%, job seekers in the urban areas are suffering more than those in the rural areas. In the second half of the session, benchmarks saw further fall to settle near their intraday low points, amid mixed cues from the global markets. Domestic sentiments remained pessimistic, with a report stating that the government’s net revenue growth from direct taxes has decelerated sharply to 4.7% for April 1-August 15 this year as against a required annual growth rate of 17.3%, reflecting lower buoyancy in the wake of an overall slowdown in the economy. Market participants also seemed taking a note of reports that Chief economic advisor K Subramanian called for a ‘mindset change’ in the private sector by desisting from the tendency to grab profit and socialise losses and also seek sops in times of stress. He also said it will be only investment and not consumption that will help the economy grow. Finally, the BSE Sensex lost 587.44 points or 1.59% to 36,472.93, while the CNX Nifty was down by 177.35 points or 1.62% to 10,741.35.