Markets to get positive start amid firm global cues

Indian equity benchmarks ended lackluster trading day with marginal cut on Monday amid weak wholesale inflation data. Today, the markets are likely to get a positive start tracking positive global cues. Traders will be getting some encouragement with Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that the central bank saw economic growth slowdown in February, prompting it to cut rates ahead of the curve and wondered why markets were surprised with the decision to pause rate reduction. Noting that there is a need for an informed and objective discussion on the country's economy, Das said the RBI would do whatever is necessary to address growth slowdown, spikes in inflation as well to ensure good health of banks and non-bank lenders. Some support may come with report that after a delay of over two months, the Centre has released Rs. 35,298 crore as GST compensation to the states for the August-September period. Market participants may take note of report that with economic growth slowing to a six-year low, IMF said that the government should undertake structural reforms such as bank clean-up and labour reforms to address the slowdown in domestic demand. However, there may be some cautiousness as global ratings agency Moody's Investors Service lowered India’s gross domestic product growth projection for the fiscal year 2019-20 to 4.9 percent from 5.8 percent, saying that weak household consumption will curb economic growth and weigh on the credit quality. There will be some buzz in the reality stocks as rating agency ICRA maintained a negative outlook for housing because of subdued demand, slow sales, over-supply and liquidity crunch. MSME stocks will be in focus as Union Minister Nitin Gadkari approved changes in the Interest Subvention Scheme guidelines for micro, small and medium enterprises (MSMEs), and said the modifications are expected to boost their productivity through access to credit at reduced cost.

The US markets ended higher on Monday as investors’ confidence was boosted by upbeat data from China while cooling trade tensions between the world's two biggest economies removed one of the hurdles for global economic growth. Asian markets are trading in green on Tuesday following overnight gains on Wall Street.

Back home, weak macro-economic data of wholesale inflation & exports snapped 3-day rally of Indian markets on Monday, with Sensex & Nifty ending in red terrain. Markets made a firm start, aided with Chief Economic Advisor Krishnamurthy Subramanian’s statement that the government is focusing on increasing consumption to boost economic growth. Highlighting steps taken by government to improve Indian economy, he said that the measures include corporate tax cuts to improve risk-return of companies. But soon, indices turned volatile, as India’s exports contracted for the fourth month in a row in November, dipping 0.34% to $25.98 billion. Sluggish trade continued in the equity markets throughout the day, as India’s Wholesale price index (WPI) inflation rose to 0.58% in the month of November 2019 as against 0.16% for the previous month and 4.47% during the corresponding month of the previous year. The rise in inflation is due to pick up in vegetable prices including onions. Market participants paid no heed towards Reserve Bank’s Governor Shaktikanta Das’ statement that the central bank had acted ahead of time by starting to slash rates in February this year, and hoped the decision to pause the cuts earlier this month will prove to be a right call over time. Finally, the BSE Sensex fell 70.99 points or 0.17% to 40,938.72, while the CNX Nifty was down by 32.75 points or 0.27% to 12,053.95.