Markets pause record closing rally on Monday

Indian equity bourses paused record closing rally on Monday, with Sensex & Nifty closing on lower note. After a weak beginning of the day, indices remained highly volatile, impacted with Assocham president Niranjan Hiranandani’s statement that the economy is facing a liquidity problem and demand recession, and it requires measures to lift consumption, including reduction in goods and services tax and personal income tax and improved credit flow, to revive. Adding more worries, International Monetary Fund chief economist Gita Gopinath said that while it was anticipated that India’s growth will slow down, the current numbers come as a shocker with a sharp decline in both investment and consumption.

In the second half of the trading session, losses got intensive, amid a private report stating that after taking a big hit from the falling rate of economic growth in 2019, the job market may remain muted in the New Year as well in terms of workforce expansion and salary hikes as more and more companies are expected to prefer up-skilling of existing staff rather than hiring new ones. However, key indices staged some recovery at the end to come off day’s low points, with reports that India's forex reserves continued on the northward trajectory, rising to a new record of $454.492 billion on the back of a $1.07 billion accretion for the week ended December 13.

On the global front, European markets were trading in green, despite an indicator reflecting the current economic situation in the euro area remained broadly unchanged, continuing to signal moderate growth in the currency bloc. The Eurocoin indicator came in at 0.15 in December versus 0.16 in November. Asian markets ended higher, even though Japan's all industry activity dropped for the first time in four months in October. The figures from the Ministry of Economy, Trade and Industry showed that the all industry activity index fell 4.3 percent month-on-month in October, after a 1.9 percent rise in September.

Back home, the consumer durables sector stocks ended higher, after reports that the consumer durables industry returned to a steady growth path in 2019 after almost two flat years but might not be able to repeat the feat in the coming year as broader market indicates economic slowdown. Further, the hospital sector remained in watch, as credit rating agency, Crisil Ratings in its latest report said that profitability of domestic hospital sector would continue to improve in the current as well as next financial year driven by enhanced coverage under Ayushman Bharat as well as deeper expansion in smaller towns.

Finally, the BSE Sensex lost 38.88 points or 0.09% to 41,642.66, while the CNX Nifty was down by 9.05 points or 0.07% to 12,262.75.

The BSE Sensex touched high and low of 41,701.62 and 41,474.61, respectively and there were 18 stocks advancing against 12 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.09%, while Small cap index was down by 0.07%.

The top gaining sectoral indices on the BSE were Auto up by 0.50%, Consumer Disc up by 0.39%, TECK up by 0.39%, IT up by 0.31% and Consumer Durables up by 0.30%, while Energy down by 1.33%, PSU down by 0.63%, Realty down by 0.62%, FMCG down by 0.47% and Power down by 0.29% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 1.42%, Hero MotoCorp up by 1.37%, HDFC up by 1.09%, Kotak Mahindra Bank up by 0.71% and Bajaj Auto up by 0.59%. On the flip side, Nestle down by 2.20%, Reliance Industries down by 1.78%, SBI down by 1.63%, Tech Mahindra down by 1.03% and ITC down by 0.95% were the top losers.

Meanwhile, amid factoring in significant deceleration in past few quarters on account of credit squeeze and deterioration in business and consumer confidence, Fitch Ratings has cut its growth forecast for India to 4.6 per cent for the current financial year (FY20) from the previous estimation of 5.6 per cent. However, it expects growth to gradually recover to 5.6 per cent in FY21 and 6.5 per cent in FY22 with support from easing monetary and fiscal policy and structural measures that may also support growth over the medium term.

It reaffirmed India's rating at 'BBB-' with a Stable Outlook saying the rating balances a still strong medium-term growth outlook compared with similar category peers and relative external resilience stemming from solid foreign-reserve buffers against high public debt, a weak financial sector and some lagging structural factors, including governance indicators and GDP per capita. Meanwhile, it said its rating for India incorporates the expectation of moderate slippage in the fiscal deficit target of 3.3 per cent of GDP in FY20.

Besides, the Fitch's FY2020 growth forecast is lower than 4.9 per cent projection by Moody's and 5.1 per cent by Asian Development Bank. The Reserve Bank of India (RBI) has also revised GDP growth forecast to 5 per cent for 2019-20 from 6.1 per cent projected in October.

The CNX Nifty traded in a range of 12,287.15 and 12,213.25. There were 28 stocks advancing against 21 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Zee Entertainment up by 3.61%, Vedanta up by 2.43%, Maruti Suzuki up by 1.56%, Dr. Reddy’s Lab up by 1.45% and HDFC up by 1.16%. On the flip side, Yes Bank down by 3.79%, Nestle down by 2.41%, Reliance Industries down by 1.76%, SBI down by 1.61% and Coal India down by 1.57% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 10.49 points or 0.14% to 7,592.97 and France’s CAC rose 0.04 points or 0% to 6,021.57, while Germany’s DAX decreased 20.85 points or 0.16% to 13,298.05.

Asian markets ended mostly higher on Monday due to greater optimism for US-China trade relations and the release of US data pointing to solid economic growth in the world's largest economy. China said on Monday it would lower import tariffs on over 850 products from January 1, including frozen pork, as well as some information technology products starting July 1. Trade optimism overall boosted sentiment as US President Donald Trump tweeted Friday that he had ‘a very good talk’ with President Xi Jinping of China on trade and that Beijing has already started large scale purchases of agricultural products and more. Japanese shares ended marginally higher as the early approval of a cancer drug and an improved earnings outlook boosted the healthcare sector in thin trade ahead of the Christmas and New Year holidays.