Markets likely to make positive start on Tuesday

Indian markets continued their strong bullish momentum for second straight session on Monday, with Sensex (39,000) and Nifty (11,600) regaining their crucial levels, led by government's decision to cut corporate tax rate and the GST Council reduced taxes on a number of items and services to boost consumption. Today, the markets are likely to extend two-day gaining momentum for yet another session following the government’s booster in the form of corporate tax rate cut, a reform which is likely to benefit several firms, amid positive Asian cues. Traders will be getting some encouragement with NITI Aayog vice chairman Rajiv Kumar’s statement that India has become a more attractive investment destination following the reduction in corporate tax rates but relocation of units from competitors such as China will depend on other factors as well, such as the ability of states to make their environment more business-friendly. He added that this measure will help restore growth momentum in the second half of the economy. He expects the second half of FY20 (October 2019-March 2020) to clock higher than 7.5% GDP growth. Traders may take note of Moody’s Investors Service’s statement that the Reserve Bank of India (RBI) Housing Finance Committee’s recent recommendations on Indian residential mortgage-backed securities (RMBS) have the potential to alleviate key credit challenges associated with the sector. Meanwhile, the Agriculture Ministry’s data showed that the country's foodgrain production is estimated slightly lower at 140.57 million tonnes in the kharif season of 2019-20 crop year on likely fall in rice and pulses output. Auto stocks will be in focus as allaying fears of the automobile industry, Union Road Transport Minister Nitin Gadkari said there is no need to ban petrol and diesel vehicles as electric mobility has picked up momentum on its own and all buses would be electric in two years. Besides, ICRA said the automotive industry is likely to be one of the key beneficiaries of corporate tax revision. It said the reduction of corporate tax rates to globally competitive levels will incentivise OEMs (original equipment manufacturers) and their vendors to increase localisation, which augurs well for the industry. There will be some buzz in the steel stocks with Union Petroleum and Steel Minister Dharmendra Pradhan’s statement that India will become a net exporter of steel in the next three years.

The US markets end mostly lower on Monday as weak economic data out of Europe stoked worries over the state of the global economy. Asian markets are trading mostly in green on Tuesday as investors’ sentiment was buoyed after US Treasury Secretary Steven Mnuchin said US-China trade talks will resume next week.

Back home, Indian bourses gave a power-packed performance for second straight day on Monday, on the back of Friday’s corporate tax cut by the government. The markets made a gap up opening, aided 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. Adding more comfort among traders, Reserve Bank of India (RBI) 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. Despite weak global cues, bulls held their tight grip on the streets for the whole day, taking support 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 remained optimistic after the Retirement fund body, 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. As per the report, the maximum jobs were created in the age bracket of 18-21. Finally, the BSE Sensex gained 1075.41 points or 2.83% to 39,090.03, while the CNX Nifty was up by 326.00 points or 2.89% to 11,600.20.