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Markets to make slightly negative start of new week
Jul-22-2019

Indian markets went through a disappointing day of trade on Friday, with benchmark indices losing over a per cent each on account of heavy selloff by the FIIs amid disappointing earnings and reports of slowing economic growth. Today, the markets are likely to make slightly negative start of the new week, amid weakness in Asian peers. There will be some cautiousness with the Reserve Bank of India’s (RBI) data showing that after touching record highs, the foreign exchange reserves declined by $1.113 billion to $428.797 billion in the week to July 12 - the first fall after four consecutive weeks of gains - due to a fall in foreign currency assets. However, some respite may come later in the day as Asian Development Bank (ADB) lowered the inflation forecast for India during the current financial year by 0.2 percentage points to 4.1 percent, on the back of gain in rupee and cut in the country's GDP projection. Traders may take note of the Confederation of Indian Industry’s (CII) statement that India needs to speedily boost a variety of exports ranging from women’s apparel, drugs and furniture to cyclic hydrocarbons, at a time when global trade growth continues to shrink. Meanwhile, SEBI has tweaked the formats for limited review and audit report of listed entities in order to align them with the revised auditing standards. This will also be applicable to entities whose accounts are to be consolidated with the listed entity. There will be some buzz in the Auto stocks as the Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, will meet on July 25 and decide on lowering tax rates for electric vehicles. GST rate for petrol and diesel cars and hybrid vehicles is already at the highest bracket of 28 per cent plus cess. There will be some reaction in banking stocks as Reserve Bank of India Governor Shaktikanta Das asked state-owned banks to follow the new framework for resolution of stressed assets as well as to speed up the recovery process. Also, there will some buzz in aviation stocks with the monthly data from regulator DGCA showing that domestic air passenger traffic rose 6.19 percent in June over the year-ago period, with local carriers flying 12.02 million passengers in the month. There will be lots of earnings reaction based on the performance of the companies, to keep the markets in action.

The US markets ended lower on Friday as geopolitical worries overshadowed the hopes of interest rate cuts by the Federal Reserve. Asian markets are trading mostly in red on Monday as investors reduced expectations of an aggressive interest rate cut by the Federal Reserve, while heightened Middle East tensions following an Iranian seizure of a British tanker lifted crude oil prices.

Back home, Indian equity markets extended their southward journey for second straight session on Friday, as both the larger peers -- Sensex and Nifty closed with the losses of around 1.50% each. Key indices made a slightly positive start of the day, aided with Finance Minister Nirmala Sitharaman’s statement that the tax proposals in the Finance Bill 2019 are aimed at improving the ease of living and reducing pain of the citizens. Nirmala Sitharaman also said that budget proposals will promote Make in India and digital payment. Adding some relief, NITI Aayog Vice Chairman Rajiv Kumar said that the focus of the second term of the Narendra Modi government is accelerated economic growth led by the private sector and private enterprise. But, markets soon lost all of their gains to remain negative for the whole day, after the International Monetary Fund’s (IMF) report showed that India's current account (CA) balance deficit grew to $68 billion in 2018-19 from $49 billion the previous year, and it said the deficit was justified by development needs. Market participants remained cautious, as sticking to his analysis that India's economic growth has been overestimated, Arvind Subramanian said he had raised doubts about the GDP numbers in 2015 when he was the chief economic adviser of the Modi government as he found inconsistency between projected growth and other macro indicators. Finally, the BSE Sensex lost 560.45 points or 1.44% to 38,337.01, while the CNX Nifty was down by 177.65 points or 1.53% to 11,419.25.
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