Benchmarks likely to make positive start amid fall in crude oil prices

Indian markets ended lower with cut of over a percent on Tuesday amid heavy selling pressure on fears of spike in crude oil prices and weakness in the rupee against the US dollar could hurt the economy further. Today, the markets are likely to make optimistic start tracking positive global cues along with easing crude oil prices. Traders will be taking encouragement with a report that the finance ministry is working on one more booster dose to give a leg-up to the economy that has hit over six-year low of 5 per cent. As per the report, the blue print for the stimulus is ready that would be announced by Finance Minister Nirmala Sitharaman in the next few days. Some support will also come with Minister of Commerce and Industry and Railways Piyush Goyal’s statement that government is planning to launch a National Logistics Policy to reduce trade costs. He added that all transport sectors of railways, civil aviation, roads and shipping would work towards bringing logistics costs below 10%. Traders may take note of Niti Aayog chief executive Amitabh Kant’s statement that structural reforms in agriculture and exports are needed to bring growth rate back to higher levels. He also said the fundamentals of the economy are intact which will help the government take back the economy to the higher growth trajectory soon despite the global slowdown. There will be some buzz in the IT services stocks with rating agency ICRA’s statement that growth of IT services companies is expected to remain in 6-8 per cent range in US dollar terms in 2019-20, even as the profitability of these firms declined in the first quarter on account of higher employee expenses. Also, power stocks will be in focus as India Ratings & Research maintained a stable-to-negative outlook on the power sector for the remaining FY20, despite an increase in electricity demand and a rise in thermal plant load factor (PLF). There will be some reaction in auto component industry stocks as ICRA revised its sector outlook on auto components to negative, following a sharp and broad-based contraction in OEM sales in the past several quarters.

The US markets ended in green on Tuesday as oil prices retreated from a historic gain and investors looked ahead to an expected cut in interest rates by the Federal Reserve. Asian markets are trading mostly higher on Wednesday following gains on Wall Street.

Back home, Indian equity bourses witnessed bloodbath on Tuesday, amid concerns over soaring crude prices following drone attacks on Saudi Arabia's oil facilities. After a negative start, indices remained sluggish for the entire day, as the Reserve Bank of India’s Governor Shaktikanta Das said that India's current account & fiscal deficit could take a hit if oil prices continue to rise after an attack on Saudi Arabian oil facilities over the weekend. Some concerns also came with reports that lose-monetary policy alone cannot arrest the deepening slump, instead government must take demand-boosting measures, especially in rural areas, by frontloading expenditure primarily through the national rural employment scheme. The markets extended losses during the second half of the trading session, after credit rating agency, India Ratings and Research (Ind-Ra) in its latest report stated that the recent set of measures to stimulate growth announced last week would yield only limited short-term benefits. It also said that the weakness in the economy has largely been caused by demand-side headwinds, which have been exacerbated by structural bottle-necks. Market participants paid no heed towards Commerce and Industry Minister Piyush Goyal’s statement that India and the US are in continuous dialogue and working towards early resolution of trade related issues. Finally, the BSE Sensex lost 642.22 points or 1.73% to 36,481.09, while the CNX Nifty was down by 185.90 points or 1.69% to 10,817.60.