Markets likely to get weak start of new week

10 Feb 2020

Indian markets snapped four-day gaining streak and ended lower on Friday in line with subdued Asian markets. Today, the start of new week is likely to be weak amid lackluster trade in global markets after death toll from coronavirus outbreak in China surpassed the SARS epidemic, raising alarm bells about its severity. Investors will be looking ahead to the macro-economic data like Index of Industrial Production (IIP), Consumer Price Index (CPI) and Wholesale Price Index (WPI) to be out later in the week. Traders will be concerned with rating agency Icra’s statement that the GST compensation fund may see a shortfall of Rs 15,000-25,000 crore for 2019-20, and it pegged the unpaid GST compensation to the states at Rs 60,000-70,000 crore for the October 2019-January 2020 period. Some cautiousness may come with the Reserve Bank of India (RBI) data showing that foreign borrowings of Indian companies fell over 45% to $2.09 billion in December 2019 as compared to the year-ago period. However, traders may take some encouragement with Union Finance Minister Nirmala Sitharaman’s statement that the Centre, in the Budget 2020, has laid the foundation of increasing consumption while ensuring that the government's investment is deployed to build infrastructure leading to a $5 trillion economy by 2024-25. Some support may came with report that foreign investors remained net buyers in Indian capital markets for a sixth straight month in February, putting in a net amount of Rs 5,177 crore mainly in the debt segment in the month so far. Meanwhile, the Centre has informally proposed to the goods and services tax council that rationalization of rates be done once in a year and not every three months. Besides, the RBI will begin the first tranche of its long-term repo operations on February 17 with three-year repo of Rs 25,000 crore, followed by another on February 24 for an equal amount. There will be some buzz in the banking stocks with Chief Economic Advisor Krishnamurthy Subramanian’s statement that the PSU Banks may see enhanced profits with write-back of some of the provisions of the loan in their balance sheets on account of the IBC resolutions and they must now tap the market themselves instead of looking for recapitalization. Pharma stocks will be in focus with report that total foreign direct investment in the drugs and pharmaceutical sector in the country rose to Rs 2,065 crore during April to September period of fiscal year 2019-20. There will be some reaction in infra stocks with report that as many as 400 infrastructure projects, each worth Rs 150 crore or more, have been hit by total cost overruns of over Rs 4 lakh crore owing to delays and other reasons.

The US markets ended in red on Friday amid lingering concerns about the coronavirus may re-emerge after traders shrugged off the worries about the outbreak to drive stocks higher. Asian markets are trading mostly lower on Monday as investors monitor the ongoing virus outbreak’s impact on Chinese manufacturers.

Back home, Indian equity benchmarks paused the gaining rally on the last trading day of the week, with Sensex and Nifty ending lower by around 165 and 40 points respectively. After a negative opening of the trading session, indices remained lackluster for the whole day, as credit rating agency ICRA in its latest report stated that the performance of India Inc. continued to weaken under multiple headwinds during Q3 FY2020. The growth in revenue dipped to the lowest in more than sixteen quarters, due to continued weakness in consumer sentiments, benign commodity prices and general slowdown in the economy. Losses got intensified over the street in second half of the session, on the back of weak cues from the global markets. Traders remained worried, after RBI’s Consumer Confidence Survey showed that the consumer confidence dropped further in January 2020 as against the last round. However, it said the future expectations index remained positive, implying an improvement in the last survey. Investors paid no heed towards RBI Governor Shaktikanta Das’ statement that the Rs 1-lakh-crore of long-term repos are aimed at helping banks lower their lending rates, thus quickening the monetary policy transmission. Finally, the BSE Sensex lost 164.18 points or 0.40% to 41141.85, while the CNX Nifty was down by 39.60 points or 0.33% to 12098.35.

Puchho Befikar
SEBI Registered: Investment Adviser - INA000013323
Research Analyst - INH000000719