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Local equities trade with traction after FM’s corporate tax cut announcement
Sep-20-2019

Local benchmarks gained traction and trading near intraday high levels in morning session, after Finance Minister (FM) Nirmala Sitharaman announced a slew of measures in her media briefing ahead of GST Council meet. Nirmala Sitharaman slashed corporate tax for the domestic companies to 22% without exemptions. Investors also cheered with Reserve Bank of India (RBI) governor Shaktikanta Das’ statement that he has expressed the hope that the ongoing crisis in Saudi Arabia that has spiked crude prices to multi-year highs will have limited impact on inflation and fiscal numbers. Traders also took note of RBI governor Shaktikanta Das’ statement that a downward trajectory for inflation through the next one year would allow more room for repo rate cuts. However, traders ignored former head of the International Monetary Fund Christine Lagarde’s statement that she has warned that global growth is ‘fragile’ and ‘under threat’ and policymakers should work to reduce manmade vulnerabilities. Beside, Statistics and Programme Implementation Ministry showed that factory investment in 2017-18 hit a three-year low of Rs 3.31 lakh crore in actual terms. Factory investment measured in terms of gross fixed capital formation (GFCF) was Rs 3.79 lakh crore and Rs 3.69 lakh crore in 2015-16 and 2016-17.

On the global front, Asian market were mostly trading in green, as the Chinese central bank cut a key lending rate in a bid to lower companies' borrowing costs. Back home, Annual Survey of Industries (ASI) showed that wage growth in India’s organised manufacturing sector slowed for the fifth year in a row, in FY18. Per-Capita wage growth for industrial workers rose 6.05% in FY18 compared with 6.2% in FY17 and 7.2% in FY16.

The BSE Sensex is currently trading at 36711.89, up by 618.42 points or 1.71% after trading in a range of 36085.74 and 36747.08. There were 29 stocks advancing against 2 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.83%, while Small cap index was up by 0.40%.

The top gaining sectoral indices on the BSE were Auto up by 2.58%, BANKEX up by 2.19%, Basic Materials up by 1.56%, Capital Goods up by 1.54%, Consumer Durables up by 1.47%, while Power was down by 0.05% was the lone losing index on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 3.82%, Yes Bank up by 3.79%, HDFC Bank up by 3.70%, Hero MotoCorp up by 2.97% and Mahindra & Mahindra was up by 2.80%. On the flip side, NTPC down by 0.78% and Power Grid was down by 0.35% were the only losers.

Meanwhile, amid gross domestic product (GDP) growth slipped to a six-year low of 5% in Q1FY20, Governor of the Reserve Bank of India (RBI) -- Shaktikanta Das stated that the government has limited fiscal space to economic growth, but low inflation can help the monetary authority ease policy rates further and help boost the economy that has badly lost its momentum. He mentioned that government measures to boost growth are more on the administrative side and it has been fiscally prudent in its moves, adding there can be more such off-balance- sheet measures from government in the offing.

The Governor said ‘today, when we see that the price stability is maintained and inflation is much below 4 percent and is expected to be so in the next 12 months horizon, there's room for (more) rate cuts, especially when growth has slowed down.’ However, he also mentioned within this policy framework, the MPC will consider these aspects as well as several other factors and the final decision will be taken in the ensuing MPC meetings in October 4.

Besides, talking about recent issues on the oil front, especially after the drone attacks on the largest Saudi Arabian facility and resultant drop in capacity by a tenth, he said it will not have a negative effect either on the domestic situation, including the fiscal balances or inflation as well. It is possible to contain the impact on the fiscal math as most fuel prices are now linked to market prices, thus capping the fiscal burden to the minimum.

The CNX Nifty is currently trading at 10928.60, up by 223.80 points or 2.09% after trading in a range of 10691.00 and 10932.50. There were 46 stocks advancing against 3 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Yes Bank up by 4.99%, Indiabulls Housing Finance up by 4.62%, HDFC Bank up by 4.46%, Eicher Motors up by 3.97% and Ultratech Cement was up by 3.86%. On the flip side, Zee Entertainment down by 8.60%, NTPC down by 0.12% and Coal India was down by 0.08% were the few losers.

Asian market were mostly trading in green; Nikkei 225 surged 33.85 points or 0.15% to 22,078.30, Taiwan Weighted strengthened 16.89 points or 0.16% to 10,911.59, KOSPI rose 10.75 points or 0.52% to 2,091.10, Hang Seng increased 12.69 points or 0.05% to 26,481.64 and Shanghai Composite was up by 5.48 points or 0.18% to 3,004.76.

On the flip side, Straits Times tumbled 2.58 points or 0.08% to 3,156.22 and Jakarta Composite was down by 27.14 points or 0.43% to 6,217.33.
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