Benchmarks trade lower amid global sell-off

Indian equity benchmarks made pessimistic start of futures & options (F&O) series expiry week. Markets were trading lower with cut of around 0.40% each in early deals on Monday tacking sell-off in the global markets. Also, there was some cautiousness ahead of Union Budget 2020 to be presented later in the week. Traders were concerned 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. Adding some more pessimism with 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. Though, downside remained capped with report that foreign portfolio investors (FPI) have infused a net sum of Rs 1,624 crore into the Indian capital markets in January so far, buoyed by the signing of the first phase of the US-China trade deal. Besides, broader indices - the BSE Mid and Small cap indices were trading with marginal gains. Moreover, Reserve Bank Governor Shaktikanta Das called for structural reforms and more fiscal measures to revive consumption demand and the overall growth, saying monetary policy has its own limitations to achieve these objectives.

On the global front, Asian markets were trading in red following the negative cues from Wall Street on Friday amid concerns about the rapid spread as well as the economic impact of the coronavirus outbreak that has infected more than 2,700 people and killed 80 people in China. Trading volumes are thin with several markets in the region remaining shut for the Lunar New Year holidays. 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. In stock specific development, ICICI Bank gained as it reported an over two-fold rise in its consolidated net profit for the December quarter. However, Bank of Baroda tumbled after it reported a surprise net loss in the third quarter due a rise in provisions. Also, Vodafone Idea slumped as India Ratings and Research downgraded the rating of Rs 3,500 crore non-convertible debentures of the telecom company.

The BSE Sensex is currently trading at 41444.83, down by 168.36 points or 0.40% after trading in a range of 41323.29 and 41510.68. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.16%, while Small cap index was up by 0.20%.

The top gaining sectoral indices on the BSE were Realty up by 0.78%, Healthcare up by 0.57%, Consumer Durables up by 0.54%, Oil & Gas up by 0.17% and Consumer Discretionary was up by 0.09%, while Metal down by 2.55%, Telecom down by 0.77%, Basic Materials down by 0.53%, TECK down by 0.50% and IT was down by 0.43% were the top losing indices on BSE.

The top gainers on the Sensex were Ultratech Cement up by 1.74%, ICICI Bank up by 1.19%, Titan Company up by 0.69%, Mahindra & Mahindra up by 0.55% and NTPC up by 0.31%. On the flip side, Tata Steel down by 2.99%, Kotak Mahindra Bank down by 1.55%, HDFC Bank down by 1.14%, SBI down by 0.94% and Hero MotoCorp down by 0.94% were the top losers.

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 is currently trading at 12196.80, down by 51.45 points or 0.42% after trading in a range of 12154.60 and 12202.60. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Ultratech Cement up by 1.84%, ICICI Bank up by 1.30%, Grasim Industries up by 0.84%, Dr. Reddy’s Lab up by 0.75% and BPCL up by 0.69%. On the flip side, JSW Steel down by 4.47%, Tata Steel down by 3.03%, Vedanta down by 2.79%, Hindalco down by 2.63% and Bharti Infratel down by 1.92% were the top losers.

Asian markets were trading in red; Nikkei 225 slipped 434.14 points or 1.82% to 23,393.04 and Jakarta Composite was down by 55.18 points or 0.88% to 6,188.93.