Domestic indices to make gap-down opening amid global sell-off

Indian markets extended the losses for the fourth consecutive day on Wednesday after the government announced a hike in securities transaction tax and short term capital gains tax in the Budget. Today, domestic indices are likely to make gap-down opening tracking sell-off in the global markets. Foreign fund outflows likely to dent sentiments in the domestic markets. Foreign institutional investors (FIIs) net sold stocks worth Rs 5,130.90 crore in the cash market on July 24. Renewed concerns over an unexpected increase in short and long-term capital gains taxes may also keep underlying sentiment cautious. However, some support may come as Revenue Secretary Sanjay Malhotra said the direct tax slabs rejig announced in the Union Budget amounting to savings of Rs 17,500 for the middle class along with an increase in the rebate limit to Rs 7 lakh in the new tax regime last year is ‘sufficient’ relief over a period of two years. Traders will be taking encouragement with report that global credit rating agencies have given thumbs up to the FY25 Budget, lauding the government's firm commitment to deficit reduction, with Moody’s Ratings noting that the Budget is credit positive. Traders may take note of Prime Minister Narendra Modi’s statement that India remains committed to elevating its ties with the UK and welcomes the desire to conclude a mutually beneficial free trade pact. Shipping industry stocks will be in focus as Union Minister for Ports, Shipping and Waterways Sarbananda Sonowal said that a new policy will be unveiled soon, giving a push to India’s ambitious plan to be part of the top five shipbuilding nations by 2047. There will be some reaction in coal industry stocks with report that coal production has demonstrated a robust year-on-year growth of 10.70 per cent for the fiscal year 2024-25. For the fiscal year 2024-25, the Ministry of Coal has set a lofty target of 1,080 million tonnes (MT) for coal production. As of July 19, 2024, production has reached 294.20 MT, demonstrating a strong year-on-year growth of 10.70 per cent compared to 265.77 MT during the same period last year.

The US markets ended lower on Wednesday as lackluster Alphabet and Tesla earnings undermined investor confidence in megacap names. Asian markets are trading in red on Thursday as investors are assessing South Korea’s GDP numbers, which grew by 2.3 per cent than the expectation of 2.5 per cent by street. 

Back home, Indian equity benchmarks ended on a weak note on Wednesday as some announcements made by Finance Minister Nirmala Sitharaman in the Budget 2024 dampened the mood on Dalal Street. After opening on a negative note, key gauges showed further decline in the early to mid-part of the session, as traders were anxious with an analyst at Moody's Ratings stating that India's fiscal deficit glide path set out for 2025-26 is reasonable, but a coalition government at the Centre may pose challenges to pass bigger reforms that the economy needs. Some concern also came as data showed that the foreign institutional investors (FIIs) turned net sellers on July 23 as they sold equities worth Rs 2975 crore, while domestic institutional investors bought equities worth Rs 1418 crore on the same day. Adding to the worries, Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal said that though the Union Budget proposed to review the customs levies over the next six months for inverted duty correction, it will be a difficult task in many cases because of nil rate on some items under free trade agreements (FTAs). Additionally, a negative global market trend further dampened sentiment in the domestic markets. However, last-hour buying helped markets to erase some of the intraday losses, as traders took some support with Commerce and Industry Minister Piyush Goyal’s statement that removal of angel tax for all classes of investors will help attract investments in the segment and further promote the growth of budding entrepreneurs. Some support also came with Ajay Seth, Secretary at Department of Economic Affairs under Ministry of Finance stating that fiscal consolidation by way of gliding down on fiscal deficit path is being done while meeting all essential expenditure. The fiscal deficit target for 2024-25 is pegged at 4.9 per cent, better than what was estimated in the Interim Budget. But markets failed to erase all the losses and ended the day lower amid volatility ahead of the monthly F&O expiry session tomorrow. Finally, the BSE Sensex fell 280.16 points or 0.35% to 80,148.88, and the CNX Nifty was down by 65.55 points or 0.27% points to 24,413.50.