Benchmarks likely to make cautious start of new week

Indian markets ended lower on Friday with losses of around half a percent each on account of selling pressure in metal, pharma and auto stocks. Today, the start of new week is likely to be cautious amid mixed Asian cues and ahead of the Reserve Bank of India’s (RBI) monetary policy decision later this week. The RBI is likely to cut the key policy rate again, the fifth in row, to complement the government’s measures like reducing corporate tax and promoting credit offtake to spur economic activity during the festive season amid range-bound inflation. There will be some cautiousness with the RBI’s data showing that India's forex reserves declined by $388 million to $428.572 billion for the week ended September 20 due to a slide in core currency and gold assets. In the week to September 20, foreign currency assets, a major component of overall reserves declined by $125 million to $396.670 billion. Though, some support may come later in the day with Union road transport minister Nitin Gadkari stating that using bio-fuels can reduce crude oil imports which will help save foreign exchange on one hand also achieve the $5-trillion GDP goal by 2025. Some support may also come with report that after remaining net sellers for the past two months, foreign investors infused a net Rs 7,714 crore into the domestic capital markets in September following a slew of economic reforms by the government. Traders may take note of report that the government will soon constitute a working group on the proposed new industrial policy which is aimed at promoting emerging sectors, reducing regulatory hurdles and making India a manufacturing hub. Besides, in a boost to Prime Minister Narendra Modi’s ambitious target of India breaking into top 50 nations on the World Bank's ease of doing business ranking, the country has figured among the 20 countries that have improved the most on the list. Auto stocks will be in focus with report that the much-awaited vehicle scrappage policy that has gone for a Cabinet approval is likely to see stringent registration and fitness norms for pre-2005 manufactured vehicles. Investors will also be eyeing release of September sales data of auto companies. There will be some reaction in consumer durable industry stocks with report that the consumer durable industry hopes to have double-digit growth during the festive season sales, despite concerns of economic slowdown. Meanwhile, Indian Railway Catering and Tourism Corporation (IRCTC), the online ticketing, tourism and the catering arm of railways, is scheduled to launch its initial public offering (IPO) today. The price band has been fixed between Rs 315-320 apiece. Minimum lot size is 40 shares.

The US markets ended in red on Friday amid report that Trump administration officials are discussing ways to limit US investors’ portfolio flows into China. Asian markets are trading mixed on Monday as investors await the release of the China Purchasing Managers’ Index expected later in the day.

Back home, weakness hit over Indian equity benchmarks on the last trading day of the week, with Sensex & Nifty closing lower by over 150 and 50 points, respectively. Markets made a negative start of the day, impacted 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. But soon, indices entered into green terrain, as Finance Minister Nirmala Sitharaman said that she is hoping the country’s economy will start looking up in the second half of the current financial year as consumption rises and banks increase their lending operations. However, Indian markets failed to hold their heads above their neutral lines and remained lackluster for the whole day, after the Finmin report showed that total liabilities of the government increased to Rs 88.18 lakh crore at end-June 2019 from Rs 84.68 lakh crore at end-March 2019. According to the latest data, public debt accounted for 89.4 per cent of total outstanding liabilities at end-June 2019. The street paid no heed towards IHS Markit’s report 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. Finally, the BSE Sensex fell 167.17 points or 0.43% to 38,822.57, while the CNX Nifty was down by 58.80 points or 0.51% to 11,512.40.