Benchmarks likely to get cautious start

Indian markets ended lower with cut of over half a percent each on Tuesday amid the broad-based selloff, dragged by IT, metal, and banking stocks. Today, the start of session is likely to be cautious amid higher crude oil prices and concerns over domestic economy. There will be some cautiousness with former chief statistician of India, Pronab Sen’s statement that India's GDP growth is likely to hit a decade low of 4.5% in the current financial year ending March, and the government should stick to its Budgeted expenditure plan even if it means fiscal slippage. Traders will be concerned with report that direct tax collections, net of refunds, for the April-November period grew just 1.6% against the required rate of 17.4% to achieve the budget estimate of Rs 13.35 lakh crore for the current fiscal. Traders may react to a private report that the Asian Development Bank (ADB) lowered its growth forecasts for developing Asia this year and the next, saying persistent trade tensions have taken a toll on the region. However, some support may come later in the day with Union Surface Transport Minister Nitin Gadkari’s statement that the government would spend a whopping Rs 5 trillion over the next two years in infrastructure projects to spur the economy and create thousands of jobs. Traders may take note of report that the Federal Reserve is expected to conclude its December meeting on Wednesday afternoon by signaling it’s in no hurry to do anything to change its neutral stand on interest rates. Meanwhile, a report of the Parliamentary Standing Committee on finance was tabled on Tuesday in the Parliament. The report suggests that the government has begun a review of Goods and Services Tax (GST), including possible resetting of GST rates and slabs. There will be some buzz in the banking stocks with CRISIL's report that banks’ retail credit growth is up due to higher reliance on securitisation by liquidity starved non-banking lenders, and does not represent a higher credit pick-up by small borrowers. Metal stocks will be in focus with ICRA's report that growth in domestic steel demand slipped into negative territory in the first two months of the third quarter of FY20 (October and November), recording a marginal de-growth of 1.8 per cent year on year (Y-o-Y). There will be some reaction in power stocks with the Central Electricity Authority’s data showing that India's power demand fell 4.3% in November from a year ago, representing the fourth straight month of decline.

The US markets ended in red on Tuesday as investors awaited concrete news on whether a new round of US tariffs on Chinese goods would take effect on December 15. Asian markets are trading mostly higher with marginal gains on Wednesday amid repro that Sino-US trade talks approached a weekend deadline with little sign of progress.

Back home, bears held tight grip on the Dalal Street in Tuesday’s trading session, with the Sensex and the Nifty losing over 0.60% each. After a cautious start, key indices remained sluggish during the whole day, as the Central Goods and Services Tax (GST) collection fell short of the budged estimate by nearly 40% during the April-November period of 2019-20. Adding more worries among market participants, a private report indicated that India is expected to witness a marginal 7 per cent rise in job creation in the October-March period of this financial year, as subdued economic conditions have dampened employment outlook. Bourses extended their losses in second half of the session to settle near day’s low points, after rating agency, Fitch Ratings said that India's non-banking financial companies will look increasingly to offshore financing as local funding conditions may remain under pressure. The rating agency expects offshore access to be restricted to larger entities with stronger credit fundamentals. Traders also took a note of Minister of State for Finance Anurag Singh Thakur’s statement that the recent spike in retail inflation is mainly due to high food prices and the government is taking steps to moderate the volatility in prices. Finally, the BSE Sensex lost 247.55 points or 0.61% to 40,239.88, while the CNX Nifty was down by 80.70 points or 0.68% to 11,856.80.