Markets plunge in early deals amid weak global cues

Indian equity benchmarks made a gap-down opening and extended their losses in early deals on Wednesday, on the back of a broad-based selloff. Sensex and Nifty were trading lower with cut of over 0.80% each. Metal, Auto and Bankex were witnessing losses of over 1.50% on BSE. Traders were concerned as the Asian Development Bank (ADB) sharply cut India's growth forecast to 6.5% for the current fiscal, weighed down by the GDP growth rate dipping to a six-year low in the first quarter. Some cautiousness also came 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. Though, market participants failed to take any sense of relief 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.

Sluggish global cues also weighed on the domestic markets, as all the Asian markets were trading lower following the negative cues overnight from Wall Street and on worries about political uncertainty in the US after House Speaker Nancy Pelosi announced a formal impeachment inquiry into US President Donald Trump. Trump faces allegations he pressured Ukrainian President Volodymyr Zelensky to conduct an investigation of former US Vice President Joe Biden, who is also the front-runner for the Democratic presidential nomination in 2020.

Back home, on the sectoral front, oil retailers like Indian Oil, Bharat Petroleum and Hindustan Petroleum were in focus after crude oil prices fell more than 2% overnight. Pharma stocks were also in watch 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. In scrip specific development, RPP Infra Projects gained on bagging new order worth Rs 414 crore.

The BSE Sensex is currently trading at 38779.41, down by 317.73 points or 0.81% after trading in a range of 38762.91 and 39087.20. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.91%, while Small cap index was down by 0.58%.

The few gaining sectoral indices on the BSE were Power up by 0.89%, Energy up by 0.46%, Consumer Durables up by 0.43% and Utilities was up by 0.31%, while Metal down by 1.79%, Auto down by 1.52%, Bankex down by 1.51%, Basic Materials down by 1.20% and PSU was down by 0.97% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 2.52%, TCS up by 1.16%, Reliance Industries up by 0.99%, NTPC up by 0.96% and HCL Technologies up by 0.28%. On the flip side, Tata Motors - DVR down by 3.51%, Tata Motors down by 3.32%, SBI down by 2.93%, Vedanta down by 2.31% and HDFC down by 2.26% were the top losers.

Meanwhile, terming the government's recent move to slash corporate tax rate as a bold measure and a highly positive step, the Reserve Bank of India (RBI) Governor Shaktikanta Das has said that it made India a very attractive destination for foreign investment. He said ‘India's corporate tax now becomes very competitive compared to other emerging market economies in ASEAN and other parts of Asia. So far as international investors are concerned, so far as FDI is concerned, I think India stands definitely in a very competitive position, and would be able to attract higher investments.’

About domestic investors, he said, they now have more cash so they will be able to undertake more capital expenditure. He also said they can invest more and some of them can deleverage their liabilities which will add strength to their balance sheets. In the biggest reduction in 28 years, the government on September 20 cut corporate tax rate by almost 10 percentage points as it looked to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investments with a Rs 1.45 lakh crore tax break. Base corporate tax for existing companies has been reduced to 22% from the current 30%.

Besides, the three-day monetary policy committee meeting will begin on October 1 amid expectations of rate cut to be announced on October 4 in a bid to revive the sagging economy. Earlier, Das had said the government has limited fiscal space to support growth, but low inflation can help the monetary authority ease policy rates further and help boost the economy. The RBI has already cut rates four times to the tune of 110 basis points this year to push growth.

The CNX Nifty is currently trading at 11492.40, down by 95.80 points or 0.83% after trading in a range of 11491.35 and 11564.95. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Power Grid Corporation up by 2.34%, Titan Company up by 1.19%, TCS up by 1.07%, Reliance Industries up by 1.01% and NTPC up by 0.74%. On the flip side, Tata Motors down by 3.48%, SBI down by 2.99%, Eicher Motors down by 2.56%, Vedanta down by 2.50% and Hindalco down by 2.40% were the top losers.

All Asian markets were trading in red; Hang Seng decreased 249.08 points or 0.95% to 26,031.92, Nikkei 225 slipped 93.72 points or 0.42% to 22,005.12, Taiwan Weighted dropped 70.86 points or 0.65% to 10,847.15, Straits Times trembled 19.93 points or 0.63% to 3,135.53, KOSPI fell 17.35 points or 0.83% to 2,083.69, Shanghai Composite declined 17.09 points or 0.57% to 2,968.25 and Jakarta Composite was down by 13.59 points or 0.22% to 6,124.02.