A time for Highs!
Stock markets in India traded the week on an exuberant note in response to positive quarterly numbers. In addition, the sentiment was also boosted amidst expectations of a cut in personal income tax rates. The BSE Sensex hit a new high on October 31 2019, while the Nifty is just shy of its previous high of 12103. Interestingly, the sharp upswing in the equity markets has been in the backdrop of lacklustre macro-economic numbers.
The core sector growth for September 2019 witnessed a sharp contraction of 5.2% from a revised 0.1% seen in August 2019 and 4.3% in September 2018. The index was dragged down by coal mining which came in at -20.5%. The cumulative growth during the period of April-September 2019-20 was 1.3%. Coal, crude oil, natural gas, steel, refinery products, cement and electricity contracted in September 2019. Adding further fuel to the fire, the IHS (Information Handling Services) Markit India Manufacturing PMI was at 51.4 in September 2019, unchanged from August. Indian manufacturers continue to be weighed down by subdued demand conditions domestically and externally, which has led them to limit production, lower inventories and reduce input buying. At the same time, business confidence sank to one of the lowest levels seen in over two-and-a-half years, the survey report showed, with companies bracing themselves for difficult times ahead.
Fiscal deficit for the period April-September 2019 reached 92.6% of its FY20 target. Total spending for this period was recorded at INR 14.89 lakh crore while total receipts stood at INR 8.37 lakh crore. Net tax collections for the period stood at INR 6.07 lakh crore while the non-tax revenue came in at INR 2.09 lakh crore. The revenue deficit for the same period stood at 4.85 lakh crore.
The US Federal Reserve lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%, citing implications of global developments for the economic outlook as well as muted inflation pressures. This was the third cut by the Fed this year. However, the Fed has indicated that it may pause rate cuts from here.
Concerns over trade tensions resurfaced after reports that Chinese officials are doubtful that they will be able to reach a comprehensive, long-term trade deal with the U.S. The preliminary deal was meant to be signed at the APEC meeting in Chile, but the South American country announced this week that it will no longer be hosting the event. The ongoing tariff war between the world's two biggest economies has disrupted supply chains and roiled financial markets across the globe for more than a year now.
Equity markets witnessed a respite from five months of intense selling pressure by foreign portfolio investors (FPIs). Tides turned in the month of October 2019 with FPIs net buying Indian equities to the tune of INR 8596 crore. Domestic institutional investors were net buyers for the six consecutive months, lapping up equities worth INR 4758 crore.
Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMIPL) makes no representation that it is accurate or complete. BNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, Asset Management Company, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.