Benchmarks likely to make cautious start

Indian markets extended their gaining streak for third straight session and settled in green territory on Tuesday amid positive domestic and global cues. Today, the markets are likely to make a cautious start amid lackluster cues from Asian peers. There will be some cautiousness with Moody's Investors Service’s statement that the economic measures announced by Finance Minister Nirmala Sitharaman are unlikely to provide some form of confidence and improve business sentiment and consumer sentiment. Moody's, which has lowered India's gross domestic product (GDP) forecast to 6.4% for FY20, said there is significant uncertainty in terms of the growth prospects both because of domestic as well as external factors. Traders will also be concerned with a private report indicating that India's economic growth momentum is expected to slip further as there is no quick fix solution for the structural issues that the economy is facing. It added that the lackluster growth in the Index of Industrial Production (IIP) is expected to prevail as the manufacturing sector is facing multiple challenges which will take time to get resolved. However, traders may take note of report that the Union cabinet in its meeting on Wednesday would take up proposals to relax foreign direct investment (FDI) in various sectors, including single brand retail and digital media. There will be some buzz in the banking stocks with global rating agency S&P’s report that given the weak credit demand from corporates and the lingering NBFC crisis, just announced recapitlisation of state-run banks will not deliver on the key objectives of higher lending and a recovering in their fortunes. There will be some reaction in auto ancillary stocks with Crisil’s report that the Rs 3.5 lakh-crore automotive components sector in India is expected to log a 5-7% compound annual growth rate (CAGR) over FY20 and FY21, down from 12% in the preceding two fiscals, due to a steep decline in domestic vehicles sales.

The US markets ended lower on Tuesday weighed down by financial stocks as a deepening of the Treasury yield curve inversion raised US recession worries. Asian markets are trading mixed on Wednesday as investors assessed the latest in the unpredictable path of trade talks between the US and China.

Back home, Indian equity benchmarks closed volatile day with notable gains on Tuesday, with Sensex and Nifty gaining around 150 and 50 points, respectively. After a positive start, key indices turned volatile, affected with FICCI’s Economic Outlook Survey stating that India's economy will grow at a median rate of 6% during the Q1FY20. Also, it pegged the annual median GDP growth forecast for 2019-20 at 6.9%, with a minimum and maximum estimate of 6.7% and 7.2%, respectively. Domestic sentiments also remained cautious during the day, amid a private report stating that India's economic growth momentum is expected to slip further as there is no quick fix solution for the structural issues that the economy is facing. However, markets managed to keep their heads in green terrain for the most part of the trading session, taking support with Chief Economic Advisor (CEA) Krishnamurthy Subramanian’s statement that the ongoing tariff war between the US and China will not have any impact on India’s export which is just below 2 percent of the global trade. Some support also came from the Reserve Bank of India’s (RBI) decision to transfer a record Rs 1,23,414 crore of its surplus to the central government for the fiscal year 2018-19 or FY19 (July to June), and an additional Rs 52,637 crore of excess provisions as recommended by the Bimal Jalan committee on Economic Capital Framework (ECF). Finally, the BSE Sensex gained 147.15 points or 0.39% to 37,641.27, while the CNX Nifty was up by 47.50 points or 0.43% to 11,105.35.