Markets likely to get pessimistic start ahead of the Union Budget 2020

Indian markets ended lower on Friday, dragged by metals, IT stocks, after the economic survey predicted FY20 GDP growth at 5%, slowest since the global financial crisis of 2008-09. Today, the start of session is likely to be pessimistic amid escalating concerns in the global markets and ahead of the Union Budget 2020 that will be tabled in the Parliament later in the day. There are expectations that the government to increase state spending on infrastructure and offer some tax incentives in its Budget 2020, aiming to get growth back up from its lowest in a decade. There will be some cautiousness as the government's fiscal deficit touched 132.4% of the full-year target at December-end mainly due to slower pace of revenue collections. The Controller General of Accounts (CGA) data showed that in actual terms, the fiscal deficit or gap between expenditure and revenue was Rs 931,725 crore. The government aims to restrict the gap at 3.3% of the GDP or Rs 703,760 crore in the year ending March 2020. Traders will also be concerned with Ficci’s statement that India Inc is facing huge risks from delays in necessary structural reforms in the factor markets and lack of adequate credit availability to MSMEs. Though, some encouragement may come later in the day as growth of eight core industries recovered to 1.3% in December 2019 after remaining in the negative zone in the previous four months helped by expansion in production of coal, fertiliser and refinery products. Some support may also come with report that GST collections have crossed the Rs 1 trillion mark for the third month in a row in January with improved compliance and plugging of evasion. Besides, the Reserve Bank of India (RBI) data showed that the country's foreign exchange reserves reached a life-time high of $466.693 billion after a massive $4.535 billion spike in the week to January 24. There will be some reaction in sugar stocks as according to All India Sugar Trade Association (AISTA), sugar production is estimated to fall almost 17.5 per cent from 33.2 MT last year to 27.4 MT in the ongoing season. The auto sector stocks will also be in action, reacting to their monthly sales numbers. Also, there will be lots of important earnings announcements too, to keep the markets in action.

The US markets ended significantly lower on Friday amid lingering concerns about the coronavirus outbreak, as the death toll from the disease continues to rise. Asian markets settled mixed on Friday as fears over the ongoing coronavirus outbreak in China continued to weigh on investor sentiment.

Back home, the Economic Survey failed to cheer Indian equity markets on Friday, as Sensex and Nifty ended lower. The start of the day was firm, aided with a report that the government is aiming at $80 billion of jewellery exports in the next five years from the present level of $40 billion. The Centre also expects the jewellery industry to generate additional employment of 2 million. But, in the late morning deals, volatility hit over the markets, as another report stated that the government’s efforts to drive ‘Make in India’ to success have not yet reflected in the country’s industrial output growth. India’s Index of Industrial Production (IIP) growth is expected to fall to 2 per cent in the current financial year 2019-20. Indices staged recovery in late noon deals but failed to hold & settled in red, amid a private report that optimism level of mid-market Indian business leaders have seen a dip of 10 percentage points in the second half of 2019 as compared to the first half but have displayed cautious optimism while entering 2020. Sentiments remained cautious, even after the Economic Survey projected a GDP growth rate of 6-6.5 percent for the next fiscal. The survey also noted that the government is committed to supporting the micro, small and medium enterprises (MSME) sector, terming it an important segment of the economy that fosters entrepreneurship and generates employment opportunities at lower capital cost. Finally, the BSE Sensex slipped 190.33 points or 0.47% to 40,723.49, while the CNX Nifty was down by 73.70 points or 0.61% to 11,962.10.