Markets likely to make positive start of F&O series expiry week

Indian markets ended at record highs on Friday with Sensex and Nifty gaining over 5% each after the government announced deep cuts in corporate taxes to revive flagging India’s economic growth. Today, the start of the crucial F&O series expiry week is likely to be in green as traders continue to take support with report that corporate tax rate cuts rekindle hopes of a revival in demand and growth as well as earnings boost. Traders will be taking encouragement as Reserve Bank governor Shaktikanta Das exuded confidence that second-quarter GDP numbers will be better than the previous one as the government has started spending again. Some support will also come with Finance Minister Nirmala Sitharaman’s statement that India has become a highly competitive investment destination post corporate tax reduction as the rates are now lower than that in China and most Southeast Asian countries. Traders may take note of a private report that the credit from banks must grow by 12% every year to meet the Centre's target to achieve a $5-trillion economy within the next five years and the step taken for mergers of the PSBs is in the right direction to meet the goal. However, some cautiousness may come with rating firm S&P Global’s statement that India's move to cut corporate tax rates was a credit negative development despite potentially boosting the broader economy as it will widen its fiscal deficit. Investors may be also concerned with the RBI’s data showing that the country's foreign exchange reserves declined by $649 million to $428.96 billion in the week to September 14, mainly on account of a drop in the value of foreign currency assets and gold holdings. Meanwhile, the all-powerful GST Council on Friday more than doubled the tax on caffeinated beverages to 40 per cent and slashed the rate on hotel room tariffs. Auto stocks will be in focus as Automobile industry body Society of Indian Automobile Manufacturers (SIAM) said the auto industry would have to find its own balance to boost demand, with the GST Council declining to cut rates for the sector. There will be some reaction in insurance stocks with Irdai data showing that India's non-life insurance companies registered a rise of 17% in their combined new premium collection at Rs 15,964 crore in August.

The US markets ended in red on Friday as Chinese trade officials canceled a planned visit to the US, sparking fears that Thursday's trade negotiations may not have brought the two countries closer to striking a deal. Asian markets are trading mostly lower on Monday as investors watch for developments on the US-China trade front.

Back home, Indian equity benchmarks cheered corporate tax cut announcement on Friday’s trading session, with the Sensex and the Nifty garnering huge gains of 5.32% each. Key indices made a flat start of the day, as the Organisation for Economic Co-operation and Development (OECD) slashed India’s gross domestic product (GDP) growth forecast by 1.3 percentage points to 5.9 per cent for 2019-20 from 7.2 per cent projected earlier. However, bourses soon gained traction, after the government cut corporate tax rate to 22% to revive investment. The government also decided to not levy enhanced surcharge introduced in Budget on capital gains arising from the sale of equity shares in a company liable for securities transaction tax (STT). Equity benchmarks hold their strong gains till the end of the day, aided with Commerce minister Piyush Goyal’s statement that he hopes the tax relief measures announced by the government for the corporates will give the necessary fillip to growth that has been sputtering for long. Besides, Union Home Minister Amit Shah said the Modi government is committed in making India a big manufacturing hub and the slashing of corporate tax rates would make the country's markets much more exciting for potential investors. Some support also came with report that Reserve Bank governor Shaktikanta Das exuded confidence that second-quarter GDP numbers will be better than the previous one as the government has started spending again. Finally, the BSE Sensex gained 1921.15 points or 5.32% to 38,014.62, while the CNX Nifty was up by 569.40 points or 5.32% to 11,274.20.