Benchmarks to make negative start amid sell-off in global markets

Indian markets ended highly volatile session in red on Tuesday, extending their losses for third day, as investors continued to weigh the financial impact of the coronavirus pandemic on the global economy. Today, the markets are likely to get negative start tracking sell-off in the global markets. There will be some cautiousness with Care Ratings report that it has projected Gross Domestic Product (GDP) growth of 4.5% for Q3-FY20, which is lower than 6.6% GDP growth recorded in the corresponding period a year ago. For the full year FY20, it has estimated GDP growth to be at 5% with a downward bias. Traders will also be concerned with payroll data of the Employees’ State Insurance Corporation (ESIC) showing that around 12.67 lakh jobs were created in December 2019 lower against 14.59 lakh in the previous month. Though, fall in crude oil prices overnight may support the markets. Some respite may come with Crisil’s report that increased demand for retail loans, strong growth in lending by private banks and pick-up in economic activity may improve credit growth to 8-9 per cent in the next financial year. Some support may also come with report that India and the US have finalised defence deals worth $3 billion, and signed three MoUs, including one in the energy sector, as Prime Minister Narendra Modi asserted that the two countries have decided to take Indo-US ties to comprehensive global partnership level. Meanwhile, amid rising instances of defaults, markets regulator SEBI has proposed a stronger framework for governing corporate bonds and debenture trustees, including enhanced disclosure requirements. Among other measures, the watchdog has suggested that NBFCs create charge on the identified assets for every bond issue. There will be some buzz in the banking stocks with Crisil Ratings’ statement that a slowdown in bank lending may be bottoming out this fiscal, while gross credit off take may rise 8-9% year-on-year in fiscal 2021 backed by retail demand. There will be some reaction in the sugar stocks as industry body ISMA revised the country's sugar production upward by two per cent to 26.5 million tonnes for the ongoing 2019-20 marketing year, much lower than last year but enough to meet the local demand.

The US markets ended lower on Tuesday as investors absorbed increasingly worrisome forecasts about the coronavirus, which is spreading faster and more broadly than initially thought and is renewing recession anxiety. Asian markets are trading in red in early deals on Wednesday in the wake of a further escalation in coronavirus cases in South Korea, Asia’s fourth-largest economy.

Back home, Indian equity benchmarks ended Tuesday’s volatile session in red terrain. The start of the day was on positive note, aided with the Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that there is space for further rate cuts despite upside risks to the inflation outlook. Indices remained in green for the most part of the day, after Niti Aayog’s National Committee on Financial Inclusion and Literacy’s chairperson Bindu Dalmia said that the government's target of achieving a $5 trillion economy by 2024-25 sounds too idealistic. She added that the target has been so set to raise the bar of India's economic performance. However, volatility witnessed over the Dalal Street which pushed markets to alter between green & red terrains, on account of mixed cues from the global markets. Market participants overlooked reports that Securities and Exchange Board of India (SEBI) has reviewed the margin framework for cash and derivatives segments. The move has been taken to keep pace with the changing market dynamics and to bring more efficiency in the risk management framework. The framework, which has been prepared in consultation with the capital markets regulator’s Risk Management Review Committee, will come into effect from May 1, 2020. Finally, the BSE Sensex slipped 82.03 points or 0.20% to 40,281.20, while the CNX Nifty was down by 31.50 points or 0.27% to 11,797.90.