Post Session: Quick Review

Local equity markets, snapping two-session of gaining streak, ended lower on Monday with losses of over a percent. The selling intensified during late afternoon session and dragged the key benchmark indices BSE Sensex and NSE Nifty below their crucial 41,200 and 12,150 levels, respectively. Benchmark indices kicked off the crucial week with a gap-down opening, following subdued global cues. Sentiments remained down-beat with a private report indicating that the country's fiscal deficit for 2019-20 is expected to widen to 3.8%and the upcoming Budget may set a target of 3.5% for 2020-21. Traders also reacted negatively to another a report stating that India plans to increase import duties on more than 50 items including electronics, electrical goods, chemicals and handicrafts, targeting about $56 billion worth of imports from China and elsewhere. 

Markets extended southward moment in the last leg of trade, as traders remained cautious ahead of Budget announcements due later this week. Sentiments were further dampened with Nobel laureate and economist Abhijit Banerjee’s statement that the banking sector in the country is ‘stressed’ and the government is in no position to bail it out. He said the demand slowdown in the automobile sector also shows that people are lacking confidence in the economy. Anxiety too persisted with private report that India's corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, amid a sharp fall in economic growth and cut in corporate tax rates.

On the global front, Asian markets ended lower on Monday, while European markets were trading in red as growing concerns over the potential economic damage from a fast-spreading coronavirus sapped demand for riskier assets. Back home, infra stocks were in focus with Union minister Nitin Gadkari’s statement that the government plans to complete three of the 22 expressways and green corridors in the next three years, including the flagship Delhi Mumbai Expressway being built at a new alignment. Jewellery stocks also were in focus with the commerce ministry data showing that gold imports fell 6.77% to $23 billion during the April-December period of the current financial year.

The BSE Sensex ended at 41152.49, down by 460.70 points or 1.11% after trading in a range of 41144.34 and 41516.27. There were 9 stocks advancing against 21 stocks declining on the index. (Provisional)

The broader indices ended mixed; the BSE Mid cap index fell 0.42%, while Small cap index was up by 0.04%. (Provisional)

The lone gaining sectoral index on the BSE was Healthcare up by 1.46%, while Metal down by 3.22%, Telecom down by 2.00%, Power down by 1.37%, PSU down by 1.33% and Bankex down by 1.14% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Mahindra & Mahindra up by 1.71%, Ultratech Cement up by 0.65%, ICICI Bank up by 0.62%, Tech Mahindra up by 0.43% and Axis Bank up by 0.31%. (Provisional)

On the flip side, Tata Steel down by 4.37%, Indusind Bank down by 3.42%, HDFC Bank down by 2.56%, SBI down by 2.42% and HDFC down by 2.21% were the top losers. (Provisional)

Meanwhile, amid the current economic slowdown, the chairman of PM's Economic Advisory Council Bibek Debroy has said that India can end up with a real Gross Domestic Product (GDP) growth of 5% this financial year (FY20) excluding the inflation rate. He added that next year, the GDP growth rate could be anything between 6-6.5%. He also said that in the present scenario achieving a 9% GDP growth will be difficult, the aspirational growth rate could be between 6.5-7%.

He said that at present, Indian economy is growing in an environment which is somewhat protectionist and has declining exports. He said the period during which the country grew at high GDP growth rates like 9%, the exports-to-GDP ratio was 20%. But now with developed countries resorting to protectionism and after the collapse of the WTO, contribution of exports to GDP in a large way does not seem possible. He further said with India being strong in services and not manufacturing, the country will have to give some to get some. It is a quid pro quo situation particularly in a regional trade bloc kind of arrangement.

Regarding taxation regime, Debroy said that the country is moving towards stable direct tax regime without any exemption. Goods and Services Tax (GST) is still work in progress. GST was supposed to be revenue neutral. But the government has lost revenue post-GST implementation, which is not tenable. He added that when both direct tax and GST rates get stabilised in future, a day might come when there would be no need to present budgets in the Parliament. On the high cost of capital, he said it will continue to be so as it is a scarce resource in India.

The CNX Nifty ended at 12112.70, down by 135.55 points or 1.11% after trading in a range of 12107.15 and 12216.60. There were 13 stocks advancing against 37 stocks declining on the index. (Provisional)

The top gainers on Nifty were Dr. Reddys Lab up by 5.51%, Mahindra & Mahindra up by 1.88%, Cipla up by 1.25%, Ultratech Cement up by 0.91% and Eicher Motors up by 0.77%. (Provisional)

On the flip side, Vedanta down by 4.87%, Tata Steel down by 4.54%, JSW Steel down by 4.10%, Hindalco down by 3.82% and Indusind Bank down by 3.37% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 167.24 points or 2.2% to 7,418.74, France’s CAC fell 121.18 points or 2.01% to 5,903.08 and Germany’s DAX was down by 255.02 points or 1.88% to 13,321.66.

Asian markets ended lower on Monday amid lingering worries over the potential impact of a new coronavirus that has killed at least 80 people in China. Trading volumes were thin as several markets including China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan were closed for public holidays. Japanese shares ended down as the coronavirus infection has spread to France, Nepal, Australia, and Malaysia, with investors nervously watching reports about the increasing number of patients. Investors also shifted their focus to corporate earnings results that will be out this week.