Benchmarks likely to make pessimistic start

Indian markets ended a volatile session almost flat on Tuesday, as investors scrambled to book profits after a stellar two-day rally. Today, the start of session is likely to be pessimistic mirroring weakness in global markets. There will be some cautiousness with report that India's fiscal deficit gap is set to increase by at least 70 basis points to 4 percent of the gross domestic product (GDP) for 2019-20 after Finance Minister Nirmala Sitharaman announced a cut in corporate tax rates on September 20. However, traders may take some encouragement later in the day as describing the government's move to slash corporate tax rate as a bold measure, RBI Governor Shaktikanta Das said it has made India a very attractive destination for foreign investment. With regard to domestic investors, he said, they now have more cash so they will be able to undertake more capital expenditure. Some support may also come with Union Minister Ravi Shankar Prasad’s statement that India must aspire to be the largest FDI recipient globally and has everything going for it, given its vibrant digital profile, huge market and investor-friendly policies to woo foreign companies, including Apple. Besides, US President Donald Trump said his country will soon have a trade deal with India to boost economic ties between the two nations. There will be some reaction in banking stocks with India Rating’s report that banks are staring at a spike in their credit cost, which is set to rise in the range of 1.9-4.6 percent for the second half of the current fiscal, with slower pace of resolution of bad loans. Pharma stocks will be in focus with ICRA’s report that the pharmaceutical sector which enjoys a host of tax exemptions will not see any tangible benefits from the corporate tax rate cut announced last week by the government. There will be some buzz in the auto stocks with report that bank loans to finance vehicle purchases in India has slipped to 4.9% year-on-year at the end of July, less than half of the growth recorded in the year-ago period, indicating a slump in demand for cars and trucks which is in sync with the overall private consumption slowdown. Meanwhile, as per a report, Indian Railway Catering and Tourism Corporation (IRCTC), a subsidiary of Indian Railways that handles its ticketing and catering operations, is likely to launch its initial public offering (IPO) on September 30. The proposed IPO is expected to see the government sell stake worth Rs 480 crore through an offer for sale.

The US markets declined on Tuesday after a hawkish statement on trade by President Donald Trump and as congressional Democrats moved towards an impeachment inquiry into Trump.  Asian markets are trading in red on Wednesday following losses on Wall Street.

Back home, after 2-day euphoric rally, bulls took a breather on Tuesday’s trading session, with the Sensex and the Nifty ending on flat note. Key indices made a cautious start of the day and traded sluggish for the most part of the session, as former Union finance minister Yashwant Sinha said that a contraction in demand and reluctance to invest are key reasons for the current slowdown in the Indian economy, which grew at its slowest pace in over six years in the June quarter. Adding more worries, the latest data released by the Agriculture Ministry showed that the country's foodgrains 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. However, markets managed to stage recovery in late afternoon session. Sentiments got comfort, after Reserve Bank Governor Shaktikanta Das said that the government's recent decision to cut corporate tax rates is a bold measure and augurs well for the economy. Adding some relief, Crisil Research also said that the reduction in corporate tax announced by Finance Minister Nirmala Sitharaman could help the top 1,000 listed companies in the country save at least Rs 37,000 crore this fiscal year. Separately, NITI Aayog vice chairman Rajiv Kumar said 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. Finally, the BSE Sensex gained 7.11 points or 0.02% to 39,097.14, while the CNX Nifty was down by 12.00 points or 0.10% to 11,588.20.