Benchmarks likely to make positive start tacking global markets

Indian markets ended lower for third day in a row on Thursday on the back of selling pressure in banking, energy and telecom stocks. Today, start of the session is likely to be optimistic tacking positive cues from global markets. Some support will come with report that the Reserve Bank of India announced simultaneous purchase and sale of government securities through special open market operations (OMOs) for Rs 10,000 crore each on December 30 following a review of liquidity situation. Traders may take note of the Food & Agriculture Organisation’s data showing that select agri and agri-based commodities like meat, milk and fruits, among others, present export opportunity worth over $97 billion (about Rs 6.9 lakh crore) for India. However, worries over delay in divestment planned this fiscal is expected to weigh on investors’ sentiment. As per a private report, the government could miss its FY20 divestment target by as much as Rs 50,000 crore. There may be some cautiousness as the International Monetary Fund (IMF) raised doubts over India's methodology to calculate gross domestic product (GDP) numbers, saying certain changes to historical series and discrepancies between GDP by activity and GDP by expenditure have made the growth calculation process complex. There may be some reaction with report that reflecting the woes of the broader economy, fund raising through IPOs plunged to a low Rs 12,362 crore in 2019, down a full 60 per cent from 2018 when the street mopped up Rs 30,959 crore. Meanwhile, Finance Minister Nirmala Sitharaman is set to hold a review meeting with chief executive officers (CEOs) of public sector banks (PSBs) on December 28. There will be some buzz in the auto stocks with CRISIL’s report that on a low base, there will be some upward momentum in overall auto space in the financial year 2020-21. So on a calendar year basis, the first quarter (Q1) might not see a lot of momentum but the uptick will start from the second half of the year. Banking stocks will be in focus with ICRA’s report that aided by better recoveries and declining slippages, overall net non-performing assets (NPAs) of the banking sector are likely to improve to 3.2-3.3 per cent by the end this fiscal from 3.7 per cent in September 2019. There will be some reaction in textile stocks with report that the operating margin of domestic cotton yarn spinners is expected to shrink by 2-4 percentage points in the 2020 fiscal following higher domestic cotton prices and a sharp fall in exports.

The US markets ended higher on Thursday, helped by reports of record year-end retail sales. Asian markets are trading mostly in green on Friday following overnight gains on Wall Street. Though, Japanese retail sales data for November released earlier on Friday came in worse than expected.

Back home, Indian equity markets extended poor run on Thursday, with Sensex & Nifty plunging around 300 & 100 points, respectively. After a cautious start, bourses remained sluggish, as International Monetary Fund said that India should recommit to cutting on debt by bringing down its public sector borrowing requirements & enhance focus on having greater fiscal transparency to help investors make informed economic decisions. Adding more worries, RBI said non-banking financial company sector reported a sharp jump in gross non-performing assets ratio to 6.1 percent in FY19 from 5.3 percent in FY18. Bears tightened their grip on Dalal Street in the second half of the session, amid reports that merger and acquisitions seem to have become a big casualty of corporates' debt distress as India Inc learned it hard way in 2019 that their first priority was to meet their loan repayment obligations and suitors from abroad also seemed reluctant in wooing distressed targets for any matchmaking. This has led to a mostly muted scene on India's corporate deal street this year, after a blockbuster 2018, while economic slowdown fears further came in the way for any significant merger and acquisition deals. Finally, the BSE Sensex lost 297.50 points or 0.72% to 41,163.76, while the CNX Nifty was down by 88.00 points or 0.72% to 12,126.55.