Benchmarks to get pessimistic start amid weak CPI, IIP data

Indian equity markets ended higher for second straight day on Wednesday led by FMCG, bank stocks.  Today, the markets are likely to make pessimistic start and traders will be negatively reacting to the economic data announced after the market hours yesterday. India's retail inflation based on Consumer Price Index (CPI) spiked to 7.59 per cent for the month of January 2020 from 7.35 per cent in December 2019, due to costlier food products like vegetables, pulses and protein-rich items. Inflation in January is well above the Reserve Bank of India's (RBI) medium-term target of 4 per cent for the fourth straight month. Meanwhile, Industrial production contracted by 0.3 per cent in December 2019 as against 2.5 per cent growth in same month a year ago, weighed by a decline in the manufacturing sector. The IIP growth during April-December period of the current fiscal decelerated to 0.5 per cent from 4.7 per cent expansion in the same period of 2018-19. However, some respite may come later in the day with Chief Economic Advisor Krishnamurthy Subramanian’s statement that the coronavirus outbreak in China provides an opportunity for India to expand exports. India is one of China's leading trade partners in Asia and has a huge trade deficit with that country. He said China imports a lot of components, parts, assembles and integrates and then exports them. India has been following the same pattern in terms of mobile manufacturing in the country. So, if one looks from this perspective, it provides a good opportunity for India. Meanwhile, Union Minister Nitin Gadkari has said that the government is targeting khadi and village industries to boost job creation in the rural and tribal areas and improve purchasing power of people. He said ‘Our focus is on village industries including honey, kulhads, bamboo, fishing, bio-fuels towards employment generation in the agriculture, rural and tribal sectors and to enhance their purchasing power through favourable policies.’ There will be some buzz in the insurance stocks as the Cabinet approved the proposal for capital infusion and immediate release of Rs 2,500 crore for three public sector general insurance companies in the light of the critical financial position and breach of regulatory solvency requirements. 

Asian markets are trading mostly higher in early deals on Thursday following the positive cues from Wall Street.  The US markets ended higher on Wednesday as investors concern over the coronavirus receded amid hopes the rate of infections is slowing.

Back home, Indian equity markets jumped high on Wednesday’s trading session to settle higher, in tandem with the global peers. After a firm start, markets remained bullish throughout the day, aided with Finance Minister Nirmala Sitharaman's statement that the economy is not in trouble and green shoots are visible with the country moving towards a $5 trillion economy. Traders remained optimistic, amid the Reserve Bank of India’s (RBI) latest report outward Foreign Direct Investment (OFDI) showing that investments by Indian firms in foreign countries rose by 42.85 percent to $2.10 billion in January 2020 as compared to $1.47 billion in the same month a year ago. Markets maintained their strong gains in the second half of the trading session, after Minister of State for Finance Anurag Singh Thakur said that the Centre has released Rs 81,043 crore as GST compensation to states for April-September 2019. He also said that GST compensation cess collection has shown upward trend since October 2019. Markets participants got relief, with principal economic adviser at the finance ministry Sanjeev Sanyal's statement that Indian economic growth is poised to bounce back after slipping to a more than six-year low of 4.5% in the July-September quarter as the government has taken measures to prop up investments and consumer demand. Finally, the BSE Sensex gained 349.76 points or 0.85% to 41,565.90, while the CNX Nifty was up by 93.30 points or 0.77% to 12,201.20.