Benchmarks likely to get negative start amid global sell-off

Indian markets ended deeply in red on Friday as some cautiousness crept in amid the SEBI's deadline over FIIs disclosure norm. Today, benchmarks likely to get negative start amid worries about a possible US economic downturn slugged Wall Street, while dragging bond yields and commodity prices lower as investors avoided risk assets for safer harbours. All eyes will be on the GST council meeting to be held later in the day. The GST Council is likely to deliberate on a host of issues, including taxation of insurance premium, GoM's suggestions on rate rationalisation, and a status report on online gaming. The fitment committee, comprising Centre and state tax officials, will present a report on GST levied on life, health and reinsurance premiums and the revenue implications. However, some support may come later in the day amid foreign fund inflows. Foreign investors infused nearly Rs 11,000 crore in domestic equities in the first week of the month owing to resilience of the Indian market and expectations of rate cut in the US. Foreign Portfolio Investors (FPIs) have been consistently buying equities since June. Before that, they had pulled out funds to the tune of Rs 34,252 crore in April-May. Traders may take note of the RBI data showing that India's forex reserves jumped by $2.299 billion to a new high of $683.987 billion for the week ended on August 30. In the previous reporting week, the forex reserves had jumped by $7.023 billion to a high of $681.688 billion. There will be some buzz in defence stocks amid buzz that the potential market opportunity for Indian defence companies is expected to rise at 14 per cent CAGR (compound annual growth rate) over financial year (FY) 2024-FY 2030E (estimated), driven by the government’s indigenisation focus on export opportunity. Power stocks will be in focus with a private report that India’s power generation and transmission sectors are poised for substantial growth, and as the country enters a phase of capex-driven GDP growth, the power intensity should rise. There will be some reaction in telecom stocks with a private report that India has emerged as the world’s second-largest market for 5G smartphones, trailing only behind China. 5G smartphones are becoming increasingly prominent across various price ranges in India. 

The US markets ended sharply lower on Friday weighed down by a jobs report that showed a continued labor market slowdown but left traders uncertain about how far the Federal Reserve will go in cutting interest rates. Asian markets are trading mostly in red on Monday after China’s CPI surges 0.6 per cent in August, missing expectations as transport, home goods prices fall.

Back home, Indian equity benchmarks ended deep in the red on Friday in line with weak global equities ahead of release of jobs data in the US, which may help Federal Reserve take a decision on interest rates later this month. Markets made a negative start and gradually declined throughout the day, as market participants remained on sidelines ahead of the Goods and Services Tax (GST) Council meeting scheduled to hold on September 09, where members could likely decide on four options regarding tax treatment of health insurance. The cost to the exchequer could potentially range from nearly Rs 650 crore to Rs 3,500 crore. Foreign fund outflows also dented sentiments. As per NSE data, Foreign Institutional Investors (FII) were net sellers of Indian equities worth Rs 688.69 crore on September 05. Markets continued to trade under pressure in late afternoon deals amid selling seen across the sectors. Traders got cautious, as Minister of Road Transport and Highways Nitin Gadkari said that India, an oil guzzler with a massive fossil fuel market, will find it difficult to cut crude imports by 25 per cent. India imported 87.7 per cent of its crude oil in 2023-24. Traders took a note of Boston Consulting Group (BCG) in association with FICCI and the Indian Banks’ Association (IBA) latest report titled ‘Banking for a Viksit Bharat’ stating that a 20-fold increase in the financial services sector is needed for India’s goal to achieve a $30 trillion Gross Domestic Product (GDP) by 2047. The report estimates that banks will need a capital base of $4 trillion, with one-third of this needing to be fresh capital deployment. Meanwhile, the Ministry of Trade and Industry of Singapore has said that India and Singapore agreed to cooperate in the development of the semiconductor ecosystem. Both countries signed a Memorandum of Understanding (MoU) for cooperation in the sector. Finally, the BSE Sensex fell 1017.23 points or 1.24% to 81,183.93, and the CNX Nifty was down by 292.95 points or 1.17% to 24,852.15.