Markets Making A Recovery Bid

Towards the end of the fortnight, Indian markets glittered, passing the dull and dodgy phase of economic slowdown. This boost was a result of the announcement by the Indian government to cut corporate tax to 25 per cent for domestic companies. Slashes to the GST rate also improved the market sentiments. The move of tax cuts is important from a medium-term perspective. 

Globally, the Nikkei index was the best performer, up by 3.57 per cent. It was followed by FTSE 100 which was up by 1.25 per cent. As the situation in Hong Kong continued to remain unstable, the Hang Seng index and Shanghai index were the worst performers during the fortnight with a decrease by 1.72 per cent and 1.58 per cent respectively. The Chinese index was down as investors have been disappointed with the lack of progress in the US-China trade war following talks. Following the collapse of Thomas Cook, other global indices showed a weak performance, as was the case for DJIA which was up by 0.43 per cent while the S&P 500 index increased by 0.45 per cent. DAX, NASDAQ and CAC were also positive with an increase of 0.95 per cent, 0.31 per cent and 0.75 per cent respectively. 

For the fortnight, the domestic indices outperformed the global indices. Nifty and Sensex were up by 5.43 per cent and 5.24 per cent respectively. The Small-cap index was up by 6.73 per cent where as Mid-Cap index was up by 7.85 per cent. Reacting to the announcement of corporate tax rate cut, Bankex was up by 11.48 per cent with mainly stocks of private sector banks being the gaining stocks. The FMCG index was up by 7.16 per cent and the Auto index was by 8.68 per cent. The Realty index was up 6.71 per cent and the Metal index increased by 7.45 per cent. Power index and IT index were among the worst performing sectoral indices, down by 0.73 per cent and 6.54 per cent respectively. Most of the stress on the power sector is due to the shortfall of supply of coal. The IT sector disappointed the most as there were no GST rate cuts announced in favour of it. 

The FIIs continued their selling spree in the last couple of weeks as well and were net sellers to the tune of Rs 721.56 crore, while DIIs were net buyers to the tune of Rs 4,700.54 crore. 

Recently, the Saudi Arabian state firm Aramco saw attacks at its major facilities. Post that, Brent crude oil surged by 6.69 per cent. Since the beginning of the month Brent crude oil is up by 10.41 per cent. After the surge in gold prices that had continued in the Indian markets for the last few months, in the last 15 days, gold prices fell by 1.52 per cent to Rs 38,960 for 10 grams of 24 carat gold. Meanwhile, rupee versus dollar has witnessed volatility during the last few weeks. As oil prices skyrocketed on account of the drone attacks on Saudi Aramco’s oilfields, rupee weakened and touched the 71.84 level on September 11, 2019. The markets have recovered for now and investors globally are pondering over the next steps governments will take to step up the pace.