Benchmarks to make cautious start amid weak IIP data

Indian markets ended with modest gains on Friday led by gains in IT, metal and auto stocks, amid positive global cues. Today, the start of new week is likely to be cautious amid weak industrial growth data and economic growth concerns. The National Statistical Office (NSO) data showed that India’s factory output shrank by 1.1% in August, recording the poorest performance in seven years due to a sharp decline in production of capital goods and consumer durable. Industrial production growth for the first time in more than two years has treaded into negative territory. Besides, the World Bank slashed its growth forecast for India’s current fiscal year to 6%, down from 7.5%, warning that the severe slowdown could further weaken the country’s stuttering financial sector. Market participants will be looking ahead to the wholesale price (WPI) and consumer price (CPI) inflation prints for September to be released later in the day. Traders will be concerned with report that foreign portfolio investors withdrew over Rs 6,200 crore from Indian capital markets in the first two weeks of October, as global recession fears and trade war concerns weighed on sentiments. Also, there will be some cautiousness as the International Monetary Fund looks at India as a country that recognizes the need for an environmentally sustainable development strategy as the global community gears up for a decisive fight against climate change. However, some support may come later in the day with firm global cues. Investors may take note of report that the country's foreign exchange reserves surged by $4.24 billion to touch a record high of $437.83 billion in the week to October 4. Meanwhile, Finance Minister Nirmala Sitharaman will hold a review meeting with CEOs of public sector banks (PSBs) to discuss various issues, including progress on credit offtake, as part of efforts to prop up the economy. Banking stocks will be in focus with the Reserve Bank of India’s (RBI) data showing that for the first time this fiscal, bank credit growth slowed to single-digit, printing in at a low 8.79 percent at Rs 97.71 lakh crore in the fortnight to September 27. There will be some buzz in the insurance stocks with report that life insurance companies saw a 35.1 percent year-on-year growth in new premium collections, to Rs 1.26 lakh crore in the April to September (H1FY20) period. Also, there will be some reaction in fertilisers stocks as leading fertiliser cooperative IFFCO reduced the retail prices of its complex fertilisers, including Di-Ammonium Phosphate (DAP), by up to Rs 50 per bag, amid easing raw materials and manufactured fertilisers prices globally. There will be some earnings announcements also to keep the markets buzzing.

The US markets ended higher on Friday after President Donald Trump said China and the US reached the first phase of a substantial trade deal that delays tariff hikes that were set to kick in next week. Asian markets are trading in green on Monday as sentiment improved following last week's high-level trade negotiations between the US and China.

Back home, Indian equity bourses bounced back in green terrain on Friday after yesterday's drubbing, with Sensex & Nifty closing higher by over 0.60% each. The start of the day was firm, aided with Union Finance Minister Nirmala Sitharaman’s statement that the government is giving sector-specific solutions to fight the slowdown in economic growth. Hinting at other measures like steps to improve exports, easing credit, making more money available by early repayments to vendors and front-loading of banks recapitalisation, Sitharaman said the government has been working on sector-specific measures. But, volatility hit markets in noon deals, as Ind-Ra slashed India’s GDP growth forecast for FY20 to 6.1% for the second time in two months. Despite some volatility, key benchmarks managed to trade in green, taking support with an EEPC India’s analysis report showing that India's engineering exports to China have gone up by an annualised 58 per cent in August, 2019, bucking the trend of drop in overall exports to the world market. Some support also came with reports that the government set up a high-level committee of officers to look into revenue shortfall being faced by the states and suggest measures for augmenting collections. Separately, India jumped two levels to 7th position in the Brand Finance Nation ranking of 2019 despite the reduction in the overall economic growth due to slowdown in the manufacturing and construction sectors. Finally, the BSE Sensex gained 246.68 points or 0.65% to 38,127.08, while the CNX Nifty was up by 70.50 points or 0.63% to 11,305.05.