Bears dominate Dalal Street; Sensex loses over 1.25%

Bears dominated Dalal Street on Wednesday’s session, with Sensex & Nifty closing lower by over 1.25% each. The markets made a negative start of the day, as the Asian Development Bank (ADB) lowered India's gross domestic product (GDP) growth forecast to 6.5 percent for the current fiscal (FY20), weighed down by the GDP growth slipping to a six-year low in the April-June quarter of 2019-20. Adding more worries, rating agency ICRA said though domestic apparel exports are expected to remain in the positive zone during rest of the year, there are multiple threats looming which could slow down the pace and make it challenging for exporters.

Key indices remained weak for the whole day, amid reports 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. Market participants overlooked RBI Governor Shaktikanta Das’ statement that the government's recent move to slash corporate tax rate 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.

On the global front, European markets were trading in red, as the Bank of Spain downgraded its growth projections citing weaker domestic demand, deterioration in external environment and uncertainties in global economy. GDP is forecast to grow 2 percent in 2019 instead of 2.4 percent estimated previously. Likewise, the outlook for 2020 was trimmed to 1.7 percent from 1.9 percent and that for 2021 to 1.6 percent from 1.7 percent. Asian markets ended mostly in red, after the Asian Development Bank downgraded its developing Asia's growth outlook as risks to prospects rise amid heightened trade disputes and weak investment.

Back home, the pharmaceutical industry stocks ended lower impacted with credit rating agency ICRA’s report stating 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. Further, the banking industry stocks remained in watch, as credit rating agency, India Rating in its latest report said that banks are staring at a spike in their credit cost, which is set to rise in the range of 1.9-4.6% for the second half (H2) of the current financial year (FY20) as Non-performing asset (NPA) resolution crawls.

Finally, the BSE Sensex slipped 503.62 points or 1.29% to 38,593.52, while the CNX Nifty was down by 148.00 points or 1.28% to 11,440.20.

The BSE Sensex touched a high and a low of 39,087.20 and 38,510.97, respectively and there were 06 stocks advancing against 25 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.76%, while Small cap index was down by 1.50%.

The few gaining sectoral indices on the BSE were Power up by 1.05%, Utilities up by 0.55%, IT up by 0.42% and TECK up by 0.14%, while Auto down by 3.84%, Realty down by 3.10%, Metal down by 2.63%, Consumer Disc down by 2.22% and Capital Goods down by 2.03% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 4.39%, TCS up by 2.13%, NTPC up by 1.74%, HCL Technologies up by 0.73% and Tech Mahindra up by 0.28%. On the flip side, SBI down by 7.37%, Tata Motors down by 6.00%, Tata Motors - DVR down by 5.84%, Maruti Suzuki down by 5.25% and Yes Bank down by 4.19% were the top losers.

Meanwhile, calling for domestic & foreign investment and collaboration in the MSME sector, Union Minister for Micro, Small and Medium Enterprises Nitin Gadkari has expressed need to reduce the cost of capital, logistics and power for making the Indian MSME sector globally competitive.

The Minister also highlighted that the MSME sector in India has tremendous potential to push growth and generate employment. He also said the government's priority is for integrated development of the rural and agro-based enterprises along with the urban-based enterprises.

Besides, Gadkari noted that the Government's target is to increase MSME's present share of 29 percent of GDP to 50 percent in the next five years and raise its export contribution from 49 percent to 60 percent. He added that to achieve these targets logistics, power and capital cost will need to be reduced.

The CNX Nifty traded in a range of 11,564.95 and 11,416.10. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 3.83%, TCS up by 1.92%, NTPC up by 1.56%, Indian Oil Corporation up by 1.23% and HCL Technologies up by 0.72%. On the flip side, SBI down by 7.70%, Tata Motors down by 5.92%, YES Bank down by 5.00%, Eicher Motors down by 4.54% and Maruti Suzuki down by 4.41% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 71.93 points or 0.99% to 7,219.50, France’s CAC fell 90.24 points or 1.6% to 5,538.09 and Germany’s DAX was down by 150.36 points or 1.22% to 12,156.79.

Asian markets ended mostly lower on Wednesday as concerns grew about the US-China trade war sapping economic growth around the world. US lawmakers called for an impeachment inquiry into President Donald Trump, increasing the prospects of prolonged political uncertainty in the world's largest economy. Japanese shares ended lower as the safe-haven yen strengthened against the dollar on worries about escalating trade dispute and political uncertainty in the United States after the launch of a formal impeachment inquiry against President Donald Trump. Further, Chinese shares closed down after US President Donald Trump delivered a stinging rebuke to China's trade practices on Tuesday at the United Nations General Assembly and said he would not accept a ‘bad deal’ in trade talks with the country.