Markets to start on positive note tracking regional peers

Indian equity markets ended lower with cut of over two percent on Tuesday after the government data showed that the country's economic growth fell to over six-year low of 5 per cent in Q1FY20. Today, the start is likely to be in green tracking the regional peers. Traders will be getting some encouragement with a task force set up by India's central bank recommended a slew of measures for developing a secondary market for corporate loans, including easing of regulations to allow foreign portfolio investors (FPIs) to directly purchase distressed loans from banks. Meanwhile, in order to sort out the problem of delayed payments being faced by small and medium enterprises (SME), SME Minister Nitin Gadkari has called a meeting of heads of banks, finance ministry officials, and CEOs of various of central PSUs on September 5.  However, traders may remain concern with Care Ratings’ report that the ongoing economic slowdown that India is witnessing may be because of weak investment growth. Two catalysts of investment - demand and availability of funds - have witnessed weak growth in the preceding months. Low capacity utilization in most of the industries left them with surplus capacity and this surplus has pulled down the need for any more expansion. It mentioned the problems in the financial sector involving NBFCs have affected the flow of funds and added to the worry. There will be some reaction in steel stocks on report that India Ratings and Research (Ind-Ra) has revised its outlook on the steel sector to 'stable-to-negative' from 'stable' for the remainder of this fiscal, owing to sluggish demand growth expectation. Ind-Ra has also revised downwards its FY20 steel demand growth expectation to around 4% from the previous forecast of 7%. There will be some buzz in the real estate stocks on report that the government may soon come out with a slew of measures to boost the real estate sector in the country. This would be a part of series of steps taken since August 23 to give a boost to the economy facing slowdown.

The US markets ended lower on Tuesday after the US launched a new round of tariffs on $112 billion in Chinese goods, with China retaliating with new levies of its own. Asian markets were trading mostly in green in early deals on Wednesday despite poor US economic data stoked global recession fears and further soured investor sentiment already hurt by heightened trade war concern.

Back home, Indian equity benchmarks witnessed sharp deep on Tuesday, on the back of weak economic data of core sector, GDP and manufacturing PMI. The start of the day was negative, as India's GDP growth slipped to an over six-year low of 5 per cent in the June quarter of 2019-20, hit by a sharp deceleration in manufacturing output and subdued farm sector activity. Adding more worries, the growth of eight core infrastructure industries slowed down to 2.1% in July 2019 as compared to 7.3% in the same month a year ago, on the back of contraction in coal, crude oil and natural gas production. Traders also remain worried, after the finance ministry indicated that Goods and Services Tax (GST) collections slipped below Rs 1 lakh crore mark to Rs 98,202 crore in the month of August 2019. Weakness persisted over the street during whole day, as India's manufacturing activity eased in the month of August to 15-month low, on the back of subdued sales to domestic and international clients. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) slipped to 51.4 in August from 52.5 in July, its lowest mark since May 2018. Domestic sentiments remained sluggish, amid market regulator SEBI's annual report stating that as macroeconomic headwinds weighed on investor sentiments through the year, foreign portfolio investors pulled out Rs 38,930 crore in 2018-19. Besides, the government's fiscal deficit touched Rs 5.47 lakh crore in the first four months (April-July) of the financial year 2019-20 (FY20), which is 77.8% of the Budget Estimate (BE). Finally, the BSE Sensex lost 769.88 points or 2.06% to 36,562.91, while the CNX Nifty was down by 225.35 points or 2.04% to 10,797.90.