Post Session: Quick Review

Indian equity markets showcased yet another courageous performance on Monday, supported by government's decision to cut corporate tax rate. Markets ended at 2-month closing high with Sensex settling above crucial 39,100 mark, while Nifty ending just shy of 11,600 mark. Markets started off with decent gains as sentiments remained upbeat 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. Domestic sentiments were also buoyed with Niti Aayog Vice Chairman Rajiv Kumar’s statement that Rs 1.45-lakh crore tax giveaway is unlikely to widen fiscal deficit much as the shortfall will be met through increased tax collections due to higher growth which the massive tax cuts are expected to achieve. Besides, the all-powerful GST Council slashed tax rates on hotel tariffs and some goods with a view to addressing sectoral concerns and spur growth.

Markets continued their strong bullish momentum in late trade, as traders remained in a jubilant mood with Union Minster Piyush Goyal’s statement that the target of making India $5 trillion economy is achievable and that all the stakeholders need to work together to meet this objective. Market participants also took encouragement with a report that Reserve Bank of India (RBI) has relaxed the priority-sector lending (PSL) rules for exporters, scrapping the turnover limit for an exporter to be eligible for such loans and increasing the sanction limit per borrower. Adding to the optimism, Employment Provident Fund Organisation (EPFO) in its latest ‘Provisional Estimate of Net Payroll’ data report showed that India created 11,61,918 new jobs in the month of July 2019 as against revised figure of 10,75,314 in June 2019.

On the global front, Asian equity ended mostly lower on Monday, as investors mulled the latest developments in trade negotiations between the US and China. European markets were trading in red, after German flash purchasing managers' index survey data for September was weaker than expected, raising more fears about the health of the economy. Back home, stocks related to steel sector ended higher after the government said it is working on various fronts to make the Indian steel sector vibrant, efficient, investor-friendly and globally competitive. 

The BSE Sensex ended at 39123.22, up by 1108.60 points or 2.92% after trading in a range of 38674.04 and 39441.12. There were 16 stocks advancing against 15 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 3.01%, while Small cap index was up by 2.75%. (Provisional)

The top gaining sectoral indices on the BSE were Capital Goods up by 6.57%, Bankex up by 5.76%, Industrials up by 5.16%, FMCG up by 4.36% and Consumer Discretionary Goods & Services up by 3.66%, while IT down by 3.39%, TECK down by 3.16%, Utilities down by 0.87%, Telecom down by 0.66% and Healthcare down by 0.46% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Bajaj Finance up by 8.76%, Asian Paints up by 8.47%, Larsen & Toubro up by 8.09%, ICICI Bank up by 7.31% and Axis Bank up by 7.10%. (Provisional)

On the flip side, Infosys down by 4.98%, Power Grid down by 4.38%, Tata Motors down by 4.16%, Tata Motors - DVR down by 3.73% and NTPC down by 3.42% were the top losers. (Provisional)

Meanwhile, expressing confidence over growth of Indian economy, the Reserve Bank of India (RBI) governor Shaktikanta Das has said that second-quarter (Q2) Gross Domestic Product (GDP) numbers will be better than the previous one as the government has started spending again. Attributing the 5% GDP growth in Q1 to very low government spending, he said with the Centre opening its coffers again growth should pick up going forward.

He said in the first quarter the government expenditure, which has a major role in GDP numbers, was very low due to the elections, pulling down the growth numbers to some extent. From the second quarter government expenditure has been picked up. So, he said that second quarter numbers will be hopefully better than the first quarter.For the first quarter, he said that the RBI analysis showed growth to be at 5.8% and all the surveys it did also projected growth to be in the range of 5.5-5.8% but the final print was much lower. He added ‘when it came in at 5% it was a surprise. That is perhaps due to conflicting signals in the economy. One month the PMI goes up, the next month it goes down. The IIP numbers have also been going up and down.’

Das also reiterated the possibility of more rate cuts if incoming data support such a move but warned against government initiating any fiscal expansion and said that it has no legroom to do so given the high deficit numbers. He also called for urgent structural reforms especially inland and labour as well as entrepreneurial areas. Besides, he welcomed the government announcement to slash corporate tax across the board and termed the same as bold moves which should benefit all sectors. In a major fiscal booster, the government had slashed effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies.

The CNX Nifty ended at 11595.50, up by 321.30 points or 2.85% after trading in a range of 11471.35 and 11694.85. There were 32 stocks advancing against 18 stocks declining on the index. (Provisional)

The top gainers on Nifty were BPCL up by 13.66%, Bajaj Finance up by 9.39%, Larsen & Toubro up by 9.14%, Eicher Motors up by 8.90% and Indian Oil Corp. up by 8.45%. (Provisional)

On the flip side, Zee Entertainment down by 8.23%, Infosys down by 5.22%, Power Grid down by 4.36%, Tata Motors down by 4.17% and Dr. Reddys Lab down by 3.52% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 48.74 points or 0.66% to 7,296.18, France’s CAC decreased 51.68 points or 0.91% to 5,639.10 and Germany’s DAX decreased 136.93 points or 1.1% to 12,331.08.

Asian markets ended mostly lower on Monday due to pessimism about the prospect of a trade war between the world's two largest economies. Chinese shares ended lower after Chinese officials canceled a planned visit to US farms and US President Donald Trump said the US was looking for a ‘complete deal’ with China and not a partial one. US President Donald Trump told reporters that he doesn't think he needs to reach a trade deal with China before the 2020 elections, claiming the US is not being affected by the trade war. Though, Seoul shares ended higher as investors watched Middle East tensions and awaited a summit between South Korea and United States this week at the United Nations. Meanwhile, the Japanese market was closed for the Autumnal Equinox holiday.