Benchmarks trade lower as IMF cuts India's growth forecast

Indian equity benchmarks made a weak start and are trading with marginal cut in early deals on Tuesday, tracking losses in Asian peers and after the International Monetary Fund (IMF) cut its growth estimate for India to 4.8% for 2019. IMF Chief Economist Gita Gopinath said growth in India slowed sharply owing to stress in the non-bank financial sector and weak rural income growth. It also expects growth to be 5.8% in 2020 and rise to 6.5% in 2021. Besides, weak Q3 earnings from selected giants mounted pressure on the markets. Though, markets off their day’s lows with Finance Minister Nirmala Sitharaman’s statement that the government's earnest attempt was to decriminalise everything that has to do with Companies Law or related acts as part of initiatives towards a $5 trillion economy. Some support also came in with a UN report showing that India was among the top 10 recipients of Foreign Direct Investment in 2019, attracting $49 billion in inflows, a 16% increase from the previous year, driving the FDI growth in South Asia. Besides, the government is likely to tweak stock market-related taxes such as dividend distribution tax (DDT) and long term capital gains tax (LTCG).

On the global front, Asian markets were trading mostly lower in the absence of fresh cues from Wall Street which was closed overnight for a public holiday. Investors’ sentiment was dampened following reports that the International Monetary Fund or IMF lowered its global growth forecasts for this year and the next year. Investors also remained cautious as they looked ahead to major corporate earnings results and central bank policy meetings due this week. Back home, aviation stocks were in focus as aviation regulator DGCA said domestic air passenger traffic grew to 14.41 crore in 2019, an increase of just 3.74 per cent compared to 2018. In stocks specific development, Oil India slid after the telecom department slapped a Rs 48,000 crore demand notice on the company in past statutory dues.

The BSE Sensex is currently trading at 41428.25, down by 100.66 points or 0.24% after trading in a range of 41301.63 and 41503.37. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index declined 0.03%, while Small cap index was up by 0.04%.

The few gaining sectoral indices on the BSE were Telecom up by 0.72%, Energy up by 0.28% and TECK was up by 0.04%, while Realty down by 0.84%, Metal down by 0.49%, Auto down by 0.45%, FMCG down by 0.43% and Basic Materials was down by 0.39% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 0.52%, NTPC up by 0.51%, ICICI Bank up by 0.50%, SBI up by 0.46% and Bajaj Finance up by 0.36%. On the flip side, Asian Paints down by 1.44%, Tata Steel down by 1.41%, Hero MotoCorp down by 1.31%, Mahindra & Mahindra down by 1.09% and HDFC Bank down by 0.92% were the top losers.

Meanwhile, citing a sharper-than-expected slowdown in local demand and stress in the non-bank financial sector, the International Monetary Fund (IMF) has slashed India’s growth estimate to 4.8% for 2019. Though, it expects growth to be 5.8% in 2020 and rise to 6.5% in 2021. IMF Chief Economist Gita Gopinath said growth in India slowed sharply owing to stress in the non-bank financial sector and weak rural income growth. Besides, she said China’s growth has been revised upward by 0.2% to 6% for 2020, reflecting the trade deal with the United States.

In India, the IMF said domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth. The markdown has been the highest for India in the latest WEO projections. Besides, the report cited monetary and fiscal stimulus, along with its expectation of subdued oil prices, for the projected improvement in India’s growth this year and the next.

Gopinath also said the pickup in global growth for 2020 remains highly uncertain as it relies on improved growth outcomes for stressed economies like Argentina, Iran, and Turkey and for underperforming emerging and developing economies such as Brazil, India, and Mexico. On the global front, it said growth is expected to accelerate to 3.3% in 2020 from 2.9% in 2019 and further to 3.4% in 2021. The IMF has trimmed its estimate on the world economy by 0.1 point each for 2019 and 2020 and by 0.2 percentage point for 2021 from the earlier forecasts.

The CNX Nifty is currently trading at 12219.70, down by 4.85 points or 0.04% after trading in a range of 12162.45 and 12222.05. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 5.03%, Zee Entertainment up by 3.05%, Coal India up by 1.02%, Yes Bank up by 0.91% and Reliance Industries up by 0.75%. On the flip side, Asian Paints down by 1.74%, UPL down by 1.54%, Indian Oil Corporation down by 1.40%, Mahindra & Mahindra down by 1.40% and Hero MotoCorp down by 1.34% were the top losers.

Asian markets are trading mostly in red, Hang Seng decreased 659.87 points or 2.29% to 28,136.04, Nikkei 225 slipped 211.93 points or 0.88% to 23,871.58, Straits Times trembled 38.67 points or 1.18% to 3,241.42, Shanghai Composite declined 32.23 points or 1.04% to 3,063.56 and KOSPI was down by 17.31 points or 0.77% to 2,245.33. On the flip side, Jakarta Composite was up by 2.88 points or 0.05% to 6,247.92.