Benchmarks likely to get flat-to-positive start tracking gains in global peers

Indian markets reversed their early losses to end December's first session in positive territory as the core sector output in October shows signs of recovery, despite a slump in the Q2 growth rate. Today, markets are likely to get flat-to-positive start tracking gains in global peers. Traders will be taking encouragement after Economic Affairs Secretary Ajay Seth said second quarter GDP growth at 5.4 per cent is lower than the potential but exuded confidence that the second half to be better. He added several high-frequency indicators in the month of October are pointing towards that. Some support will come as rating agency ICRA said it expects sequential revenue growth for India Inc in the December quarter, led by improved rural demand and uptick in government spending, additionally supported by the festival season. However, some cautiousness may come with a private report that the recent decline in corporate earnings is likely to cast a shadow on the government’s direct-tax receipts and its fiscal position. Tax payment by listed companies was down 7 per cent year-on-year (Y-o-Y) in Q2FY25, their worst showing in the last four years and the first decline in corporate tax in seven quarters. Meanwhile, the Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation, led by Deputy Chief Minister of Bihar Samrat Chaudhary, recommended a new slab of 35 per cent for tobacco, tobacco products and aerated drinks. At present, such products are taxed at 28 per cent. Metal stocks will be in focus as the steel ministry proposed for a 25 per cent safeguard duty on import of certain steel items into the country. There will be some reaction in stocks of aviation and oil & gas sectors as the government withdrew the windfall tax levied on Aviation Turbine Fuel (ATF), crude products, petrol and diesel through a notification introduced in the Lok Sabha. The withdrawal of the windfall tax is a big relief to the oil companies like Reliance and ONGC. Insurance company’s stocks will be in limelight after Finance Minister Nirmala Sitharaman said the cost of insurance to the policy holder is expected to come down if the GST Council recommends a reduction in GST rate on health and life insurance policies.  There will be some buzz in power stocks as the government data showed that India's power consumption rose 5.14 per cent to 125.44 billion units (BU) in November as compared to the year-ago month. In November 2023, power consumption was 119.30 GW.

The US markets ended mostly in green on Monday boosted by tech-related shares following the market's strong November gains, as investors awaited this week's economic data including the key monthly jobs report on Friday. Asian markets are trading mostly higher on Tuesday following the positive lead from Wall Street where a rally in the world’s largest technology companies drove stocks to fresh all-time highs.

Back home, Indian equity benchmarks witnessed a second straight day of gains on Monday, amid buying in blue-chip stocks Ultratech Cement, JSW Steel and Adani Ports & SEZ. Markets opened on a flat note and traded with volatility in first half of trading session amid disappointing macroeconomic data. India’s economic growth slowed to a near two-year low of 5.4 percent in the July-September quarter of this fiscal due to poor performance of manufacturing and mining sectors as well as weak consumption.  Traders were cautious as Crisil expects GDP growth to slow to 6.8% this financial year 2024-25. It said the growth is weighed down by high interest rates and low fiscal impulse. Some pessimism also came in as a business survey found that India's factory growth cooled in November yet maintained a strong pace, leading to significantly improved optimism despite demand easing a bit due to higher price pressures. The HSBC final India manufacturing Purchasing Managers' Index, compiled by S&P Global, fell to 56.5 last month from 57.5 in October. A preliminary estimate was far higher at 57.3. However, key gauges gained traction in second half of trading session and settled with gains of over half percent each, taking support from the government data showing that foreign direct investment in India rose by 45% year-on-year to $29.79 billion in April-September this fiscal on healthy inflows in services, computer, telecom and pharma sectors. Some solace also came as the government data showed that the total gross Goods and Services Tax (GST) revenue grew 8.5% to over Rs 1.82 lakh crore in November as compared to Rs 1.68 lakh crore in the same month a year ago. Some optimism came as Reserve Bank of India (RBI) data showed that India services exports rose for the second month in a row, increasing 22.3% in October to $34.3 billion. Finally, the BSE Sensex rose 445.29 points or 0.56% to 80,248.08, and the CNX Nifty was up by 144.95 points or 0.60% to 24,276.05.