IGI Logo

Markets fall for sixth session in row ahead of Budget 2021

Indian equity benchmarks witnessed a spike in volatility during the session and ended with losses of over a percent each on Friday, due to intense selling ahead Finance Minister Nirmala Sitharaman's third Union Budget presentation due on Monday, February 1. The benchmarks opened higher, taking support from SBI Research’s report stated that with record GST collections expected in January at Rs 1.21-1.23 lakh crore, the shortfall in state GST can be narrowed to a minimal Rs 11,000 crore. Ongoing efforts to plug the leakages in GST collection has been bearing fruit since September. Traders were seen taking a note of Prime Minister Narendra Modi’s statement that India is promoting investment in frontier technologies including Artificial Intelligence, additive manufacturing and interdisciplinary cyber-physical systems. Speaking at the World Economic Forum's Davos Dialogue via video conferencing, PM Modi said that the transactions at Unified Payments Interface (UPI) platforms have crossed 2 billion per month and a major portion of these transactions are taking place through the apps developed by private players.

However, markets gave up gains fell sharply lower in final hour of trading session, as IMF's Chief Economist Gita Gopinath stated that it would be damaging for India to start tightening policy support in the midst of the COVID-19 pandemic. She said there is scope for the Indian government to provide more direct support to people. Markets mood was also affected after the Economic Survey 2020-21 said that India’s GDP is estimated to contract by 7.7 per cent during the current fiscal. According to the survey, the real growth rate for FY22 was assumed at 11.5 per cent based on IMF estimates.

On the global front, Asian markets ended mostly in red, as rising coronavirus cases, signs of a liquidity squeeze in China and persisting concerns over a retail trading frenzy in the United States triggered risk aversion. Besides, separate reports showed Industrial production in Japan dropped a seasonally adjusted 1.6 percent sequentially in December, while the annual unemployment rate rose for the first time in 11 years. European markets were trading lower, with investor sentiment jolted by a surge in speculative trading from retail investors organized over online forums, such as Reddit. Besides, German GDP grew 0.1 percent sequentially in the fourth quarter, slower than the 8.5 percent expansion posted in the third quarter due to the restrictions imposed to contain the spread of Covid-19, data from Destatis showed. Back home, on the sectoral front, power stocks were in focus with rating agency Ind-Ra’s report that power generation in the country would continue to grow in fourth quarter of this fiscal year on the back of revival of electricity demand and adequate coal stocks at power plants. Auto stocks too were buzzing as Siam said automobile industry in India is going through a long-term structural slowdown as the compound annual growth rate (CAGR) across all major vehicle segments has witnessed a decline over the past three decades.

Finally, the BSE Sensex fell 588.59 points or 1.26% to 46,285.77, while the CNX Nifty was down by 182.95 points or 1.32% to 13,634.60.

The BSE Sensex touched high and low of 47,423.66 and 46,160.46, respectively and there were 4 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.69%, while Small cap index was down by 0.25%.

The only gaining sectoral indices on the BSE were Bankex up by 0.67% and Realty up by 0.35%, while Telecom down by 2.97%, Auto down by 2.95%, TECK down by 2.63%, IT down by 2.48% and Consumer discretionary down by 2.21% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 5.44%, Sun Pharma up by 3.91%, ICICI Bank up by 1.68% and HDFC Bank up by 1.50%. On the flip side, Dr. Reddys Lab down by 5.69%, Maruti Suzuki down by 4.99%, Bharti Airtel down by 3.12%, Bajaj Auto down by 3.02% and Infosys down by 2.87% were the top losers.

Meanwhile, to achieve a double-digit growth rate for the next fiscal year, International Monetary Fund (IMF) has said that India must ensure that the COVID-19 pandemic is well contained and the distribution and rollout of vaccines are well managed in a timely manner. It also insisted that securing a robust and sustained economic recovery will require a bold and multifaceted policy response, including investment in health infrastructure to further contain the pandemic and to ensure the availability and effective distribution of vaccines and treatments.

IMF has stated that while the economic recovery is underway, the output is projected to remain below its potential in the near-term and substantial downside risks remain. It noted that this implies that fiscal policy can and should remain accommodative next year, supporting the recovery. It also said that looking around the world at the experience of other countries, including those that were hit by the pandemic earlier, three areas seem to be priorities: higher spending in health; targeted support and assistance to vulnerable households and small and medium-sized firms; and higher public infrastructure spending.

Furthermore, it said near-term accommodative fiscal stance needs to be accompanied by a credible medium-term fiscal consolidation plan anchored on revenue mobilisation, structural reforms that boost the growth potential, and policies to tackle weaknesses in the financial sector, all of which can reinforce market confidence and contribute towards enhancing fiscal space.

The CNX Nifty traded in a range of 13,966.85 and 13,596.75 and there were 7 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 6.14%, Sun Pharma up by 4.26%, ICICI Bank up by 2.03%, HDFC Bank up by 1.43% and HDFC Life Insurance up by 1.19%. On the flip side, Dr. Reddys Lab down by 5.30%, Maruti Suzuki down by 4.83%, Hero MotoCorp down by 3.69%, Tata Steel down by 3.33% and Bharti Airtel down by 3.27% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 80.54 points or 1.23% to 6,445.61, France’s CAC decreased 70.46 points or 1.28% to 5,440.06 and Germany’s DAX decreased 167.70 points or 1.23% to 13,498.23.

Asian markets ended lower on Friday as lingering concerns over a retail trading frenzy in the United States kept market sentiments under pressure. Chinese shares ended lower due to concerns over continued tight liquidity conditions, despite the country's central bank PBoC injecting 100 billion yuan into the financial system. Further, Japanese shares declined after Citron Research, a short-selling hedge fund caught in the short-squeezing of Gamestop shares, said it would make a major announcement later in the day, while downbeat industrial production and unemployment data also dented investor sentiment. Japan Industrial Production dropped a seasonally adjusted 1.6 percent in December following the 0.5 percent fall in November, while the annual unemployment rate rose for the first time in 11 years.

For More  LKP Securities Ltd Disclaimer  http://www.lkpsec.com/

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer