Post Session: Quick Review

Extending their losing streak for fourth straight session, Indian equity benchmarks ended Thursday's trade on a pessimistic note with losses of around half a percent, as investors remained on the sidelines ahead of the RBI policy decision due tomorrow. The markets made a gap-down opening, following weak Asian markets amid fresh trade war fears. Traders were concerned with report that S&P Global Ratings in its quarterly report on the Asia-Pacific region has slashed India’s Gross Domestic Product (GDP) growth projection to 6.3% for the current financial year (FY20) from 7.1% forecasted earlier, amid decline in private consumption. Some cautiousness also came in with the finance ministry’s data showing that Goods and services tax (GST) collection fell to a 19-month low of Rs 91,916 crore in September, pointing to a deepening economic slowdown. It is the second straight month when the collection has fallen below the Rs 1-trillion mark.

However, key indices pared most of their losses in afternoon session to come off their intraday low points, as traders found some solace with DPIIT Secretary Guruprasad Mohapatra’s statement that with a strong policy driven government at the Centre, favourable conditions exist in India to achieve the target of $5 trillion economy by 2024. But, markets failed to trim all of their losses and saw strong sell-off, as anxiety remained among investors with report that the Finance Ministry made it clear that companies opting for a lower tax of 22% will not be eligible for accumulated additional depreciation and Minimum Alternative Tax (MAT) credit. The market participants even overlooked Finance Minister Nirmala Sitharaman’s statement that the Insolvency and Bankruptcy Code has improved business climate in the country by making it easier for enterprises to exit in case of difficulties.

On the global front, Asian markets ended mostly lower on Wednesday, while European markets were trading mixed after the U.S. announced it would impose billions of dollars’ worth of tariffs on exports from the European Union. Back home, select auto stocks ended in red with report that low consumer sentiment continued to subdue sales performance of the Indian automobile sector in September, as major industry players reported a significant decline in their respective sales figures. Banking stocks were in focus with domestic ratings agency Crisil’s report said that the Indian banking system's stock of dud assets will further reduce to up to 8 per cent level by March 2020, but the NBFCs may continue to face challenges.

The BSE Sensex ended at 38108.56, down by 196.85 points or 0.51% after trading in a range of 37957.56 and 38310.93. There were 11 stocks advancing against 20 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 0.31%, while Small cap index was down by 0.39%.(Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.84%, Realty up by 1.03%, Energy up by 0.87%, PSU up by 0.52% and Consumer Durables up by 0.44%, while Metal down by 2.92%, Basic Materials down by 1.80%, Telecom down by 1.05%, Bankex down by 0.95% and Capital Goods down by 0.47% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Yes Bank up by 35.31%, Tata Motors up by 5.94%, Tata Motors - DVR up by 5.72%, ITC up by 2.23% and HCL Techologies up by 1.51%. (Provisional)

On the flip side, Vedanta down by 4.49%, Tata Steel down by 3.47%, Indusind Bank down by 2.98%, HDFC Bank down by 2.04% and Kotak Mahindra Bank down by 1.98% were the top losers. (Provisional)

Meanwhile, S&P Global Ratings in its quarterly report on the Asia-Pacific region has slashed India’s Gross Domestic Product (GDP) growth projection to 6.3% for the current financial year (FY20) from 7.1% forecasted earlier, amid decline in private consumption. Though, it expects the Indian economy to recover in FY21 to 7%. It said ‘India's slump is deeper and more broad-based than we expected. In the March-June quarter, the economy expanded by just 5%, well below potential, which we estimate to be north of 7%. Most alarming has been the precipitous decline in private consumption growth that had been the engine of the economy in recent years - down to about 3% in the March-June quarter.’

On the government’s effort to stimulate the economy through substantial reductions in corporate taxes, S&P said it will cost the exchequer 0.7% of GDP, though the net impulse will be smaller, with the government eliminating some exemptions. The report said short-term effect on the economy would be limited until businesses felt more confident about the outlook for demand. It added that other fiscal support is more targeted and may lift demand in some segments of the economy- e.g., income transfers to farmers.

On the Reserve Bank of India's monetary policy, S&P said ‘we expect further cuts if external conditions (US rates and oil prices) provide space. Transmission will be imperfect, however, due to long-standing balance sheet constraints among public banks and stress among non-bank lenders. The negative surprises of recent quarters will continue to weigh on private domestic demand. So while some recovery is likely, growth may remain below potential for some time.’

The CNX Nifty ended at 11313.10, down by 46.80 points or 0.41% after trading in a range of 11257.35 and 11370.40. There were 19 stocks advancing against 31 stocks declining on the index. (Provisional)

The top gainers on Nifty were Yes Bank up by 34.06%, BPCL up by 7.51%, Zee Entertainment up by 6.50%, Tata Motors up by 6.46% and Indian Oil Corp. up by 2.96%. (Provisional)

On the flip side, Vedanta down by 4.56%, Hindalco down by 3.98%, Coal India down by 3.55%, Tata Steel down by 3.41% and Indusind Bank down by 3.05% were the top losers. (Provisional)

European markets were trading mixed; UK’s FTSE 100 decreased 34.46 points or 0.48% to 7,088.08, while France’s CAC increased 33.92 points or 0.63% to 5,456.69.

Asian markets ended mostly lower on Thursday after Washington opened a new front in its trade wars by imposing swingeing tariffs on European goods, adding to uncertainty surrounding the US-China trade war. The US proposed to impose tariffs on $7.5 billion of goods from the European Union as part of a long-running complaint over subsidies given to the European plane maker Airbus. The Office of the US Trade Representative said that the tariffs will take effect on October 18. Weak US data also rekindled investor concerns about slowing global growth. Japanese shares ended lower as weak US data offered fresh evidence of the damaging effects of the US-China trade war. Investors also reacted to the latest survey from Jibun Bank revealing that the services sector in Japan continued to expand in September, albeit at a slower rate. Though, Hong Kong shares ended up as media reports suggested that Hong Kong will use an emergency ordinance for the first time in more than a half a century in order to ban face masks at public gatherings. Meanwhile, markets in South Korea and China were closed for public holidays.