Indian markets settle with deep cuts on Monday

Indian equity bourses settled with deep cuts on Monday’s trading session. After a weak start, indices remained under a grip of bears throughout the day, as think tank National Council of Applied Economic Research (NCAER) pegged the India’s economic growth for the current fiscal at 4.9%, a tad down from 5% estimated by the National Statistical Office (NSO). Market participants were seen taking note of the retirement fund body, EPFO’s latest ‘Provisional Estimate of Net Payroll’ report showing that India created 1008600 new jobs in the month of December 2019 as against revised figure of 1009238 in November 2019.

Losses got intensified over the Dalal Street in the last leg of the trade, on the back of weak cues from the global markets. Domestic sentiments remained pessimistic, as Former RBI governor C Rangarajan said the Reserve Bank alone can not contain inflation as supply-side shocks are needed to be managed by the government. The street paid no heed towards the industry body Assocham’s statement that Indian industry and trade, including pharmaceuticals, are ready to manage the ‘evolving’ coronavirus situation without causing any major impact on the supply chain and no major challenge is foreseen in the near term.

On the global front, European markets were trading in red, as Lithuania's industrial production declined in January, led by fall in electricity output. Industrial production decreased a working-day adjusted 4.0 percent year-on-year in January, led by a 13.4 percent drop in electricity, gas, steam and air conditioning supply. Asian markets ended mostly lower, after Singapore's consumer price inflation remained stable in January. The data from the Monetary Authority of Singapore and the Ministry of Trade and Industry showed that the consumer price index rose 0.8 percent year-on-year in January, same as seen in December.

Back home, metal stocks ended lower, even after Union Steel Minister Dharmendra Pradhan urged Japanese investors to invest in India's steel sector, saying the country offers a fast-growing market and steel consumption will more than double in the coming years. Further, sugar industry stocks remained in watch, as the government reallocated unused export quota of 6,50,000 tonnes of sugar in the ongoing 2019-20 marketing year under the Maximum Admissible Export Quota scheme. For the current year, the government has allowed export of 6 million tonnes of sugar under the quota to help deal with the surplus sugar.

Finally, the BSE Sensex slipped 806.89 points or 1.96% to 40,363.23, while the CNX Nifty was down by 251.45 points or 2.08% to 11,829.40.

The BSE Sensex touched high and low of 41,037.01 and 40,306.36, respectively and all the 30 stocks were declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.60%, while Small cap index was down by 1.58%.

The top losing sectoral indices on the BSE were Metal down by 5.71%, Auto down by 3.39%, Telecom down by 3.33%, Basic Materials down by 2.97% and Energy down by 2.67%, while there were no gaining sectoral indices on the BSE.

The top losers on the Sensex were Tata Steel down by 6.39%, ONGC down by 4.72%, Maruti Suzuki down by 4.24%, Titan Co down by 3.42% and HDFC down by 3.29%.

Meanwhile, expressing need to shift from pro-crony to pro-business policies, Chief Economic Advisor (CEA) Krishnamurthy Subramanian stated that India has some distance to go in terms of enabling that fully. He added that it will be pro-business policies that will enable the ‘invisible hands of the market’ and also take the country to the $5-trillion gross domestic product (GDP) goal. He said pro-business policies are those that enable fair competition in the country. On the other hand, pro-crony policies just help incumbents and that is something that we have to stay away from in enabling the invisible hands of the market.’

Subramanian said after the Comptroller and Auditor General (CAG’s) report on telecom spectrum allocations came out in 2011, investor returns from connected companies, a euphemism for crony firms, had been very low as compared to the broader indices. He further said the problem with cronyism is that it is not a better business model, and added that one should always aim for ‘creative destruction’ where incumbents were challenged. He also made a strong case for not depending only on recent work in economics to make policy choices and neglecting age-old texts like the Arthashastra.

Pointing out to the recent Economic Survey, he said over 40 million well-paying jobs could be created in the country by 2025 by focusing on assembling for the world, and the same could go up to 80 million by 2030. About the Budget’s thrust on imposing tariffs on certain sectors and how it has been criticised as being protectionist by some, Subramanian said ‘we needed to make a distinction between duties that are imposed on finished products against those on raw materials or intermediate goods, which hurt exports.’

The CNX Nifty traded in a range of 12,012.55 and 11,813.40. All the 50 stocks were declining on the index.
The top losers on Nifty were JSW Steel down by 7.35%, Vedanta down by 6.46%, Tata Steel down by 6.28%, Hindalco down by 5.55% and Tata Motors down by 4.98%.

European markets were trading in red; France’s CAC decreased 227.29 points or 3.77% to 5,802.43, Germany’s DAX fell 485.09 points or 3.57% to 13,094.24 and UK’s FTSE 100 was down by 248.89 points or 3.36% to 7,155.03.

Asian markets ended mostly lower on Monday as spreading of corona virus outbreak outside China fueled worries about the impact on global economic growth. South Korea raised its corona virus alert to the ‘highest level’, while Italy and Iran confirmed an uptick in corona virus infections. Chinese shares ended lower as new cases of corona virus flared outside China, offsetting assurances from Beijing that it would step up policy adjustments to help cushion the blow to its epidemic-hit economy. Meanwhile, the Japanese markets were closed for the Emperor's Birthday holiday.