Post Session: Quick Review

Indian equity benchmarks ended volatile day of trade in red terrain on Friday, amid weak global cues as concerns over US political uncertainty kept investors on edge. After making a cautious start, key bourses traded slightly higher, as traders took some support on report that Union Finance Minister Nirmala hoped the economy will start looking up in the second half of the current financial year as consumption rises and banks increase their lending operations. She also said private sector banks were not facing any liquidity crisis while exuding confidence that demand would return and motivate the economy to move at a faster rate. But, markets quickly taken a turn towards negative zone, as traders were cautious with Fitch Ratings’ statement that the steep cut in tax paid by companies may stimulate investments and economic growth only in the medium term, but it will lead to breach fiscal targets in the current fiscal itself. It expects India to miss its fiscal deficit target of 3.3% of GDP for the current financial year by about 40 basis points following last week's decision to reduce corporate tax rates, resulting in the loss of an estimated Rs 1.45 trillion in tax revenue. Markets continued sluggish trend in late deals, despite IHS Markit’s report stating that the steepest ever cut in tax that companies pay will improve relative competitiveness of India and should help boost corporate investment over the medium-term.

On the global front, Asian markets ended mostly lower on Friday as concerns surrounding a potential impeachment inquiry into US President Donald Trump and weak data from China offset renewed Sino-US trade talk optimism. European markets were trading in green. Back home, the telecom stocks were in focus with ICRA’s statement that after scaling a high propelled by 4G network expansion, the capex intensity of the telecom industry is expected to witness moderation till the point there is technology upgrade to 5G, which is still some time away.

The BSE Sensex ended at 38836.44, down by 153.30 points or 0.39% after trading in a range of 38782.60 and 39107.37. There were 9 stocks advancing against 22 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 0.71%, while Small cap index was down by 0.85%.(Provisional)

The few gaining sectoral indices on the BSE were Telecom up by 1.48%, Energy up by 0.15% and FMCG up by 0.08%, while Metal down by 2.88%, Realty down by 2.45%, Healthcare down by 1.54%, Auto down by 1.47% and Basic Materials down by 1.37% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 1.93%, Bajaj Finance up by 1.74%, ITC up by 1.10%, Kotak Mahindra Bank up by 1.06% and Reliance Industries up by 0.90%. (Provisional)

On the flip side, Vedanta down by 5.36%, Yes Bank down by 5.00%, Indusind Bank down by 4.68%, Tata Steel down by 4.64% and ONGC down by 4.31% were the top losers. (Provisional)

Meanwhile, Fitch Ratings has said that the steep cut in tax paid by companies may support efforts to stimulate investment and Gross Domestic Product (GDP) growth in the medium term, but will cause the fiscal deficit to widen in the near term. It added that as such, slippage from previous government fiscal targets this year (FY19-20) is now very likely. It said a positive impact on FDI would be more likely if the tax cuts were accompanied by further measures to improve India's business environment. In particular, corporate tax rates are likely to be only one in a list of factors determining investment decisions, along with the legal environment, labour market regulations, infrastructure development and enhancements to the overall business climate.

The rating agency said faltering domestic demand, a weak global trade environment, asset-quality challenges at banks and funding pressure on non-banking finance companies have contributed to economic slowdown. Fitch said it will later this month release its revised growth estimate for FY19-20 for India which will be significantly lower than the 6.6% forecast in June. It added that the policy measures taken will likely support a gradual recovery in FY20-21 and FY21-22. In contrast to the growth impact of tax cuts, the fiscal impact will be felt in this fiscal year and the corporate tax reduction will cost around 0.7% of GDP in lower revenue - about two-thirds to the central government and one-third for state governments.

As per the report, expenditure postponements are more difficult for the government given weak growth, and it expect the central government to miss its 3.3% of GDP deficit target for FY19-20 by about 0.4 percentage points. It expects a general government deficit of 7.5% of GDP, well above the 'BBB' category median of 1.9%. The rating agency said the general government debt ceiling of 60% of GDP is unlikely to be met by March 2025, as stipulated by the Fiscal Responsibility and Budget Management Act, as this would require significant deficit reduction. Besides, Finance Minister Nirmala Sitharaman had announced the lowering of the base corporate tax rate to 22% from 30% for companies.

The CNX Nifty ended at 11515.95, down by 55.25 points or 0.48% after trading in a range of 11499.75 and 11593.60. There were 12 stocks advancing against 38 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bharti Airtel up by 1.93%, Bajaj Finance up by 1.70%, Kotak Mahindra Bank up by 1.27%, Indian Oil Corp. up by 1.18% and ITC up by 1.14%. (Provisional)

On the flip side, Vedanta down by 5.27%, Yes Bank down by 5.09%, Indusind Bank down by 4.72%, Tata Steel down by 4.51% and Zee Entertainment down by 4.39% were the top losers. (Provisional)

European markets were trading in green; UK’s FTSE 100 increased 85.72 points or 1.17% to 7,436.80, France’s CAC rose 22.10 points or 0.39% to 5,642.67 and Germany’s DAX was up by 95.53 points or 0.78% to 12,384.07.

Asian markets ended mostly lower on Friday as concerns surrounding a potential impeachment inquiry into US President Donald Trump and weak data from China offset renewed Sino-US trade talk optimism. Meanwhile, reports showed that the US economy grew more slowly in the second quarter, updated figures confirm, and is slow growth is expected to persist through the end of the year largely because of the festering trade fight with China. Japanese shares ended lower due to worries about corporate governance after report that executives from Kansai Electric Power Co Inc received payments from a former official of a town that hosts one of the utility's nuclear power plants. Though, Chinese shares ended higher even as data showed the country's industrial profits contracted in August after a brief recovery in July. China’s industrial profits for August dropped 2% from a year earlier, according to the country’s National Bureau of Statistics. That followed a 2.6% gain in July and a 3.1% in June.