Mumbai: The Indian stock markets ended lower on Monday as investors remained cautious with slower factory output growth, rising crude prices and tax relief on some items under the goods and services tax (GST) expected to threaten the government’s fiscal targets.
The Sensex ended at 33,033.56 points, down 281 points or 0.84%, while the 50-share index NSE slipped 96.80 points or 0.94% to close at 10,224.95 points.
Markets around the globe also remained weak on US tax reform uncertainties. Japan led the losses in the Asian region, while European markets were down around 1%.
“Forecasts by the International Monetary Fund (IMF) also indicate that growth in the US will moderate over the medium term. The Trump government’s inability to push through major economic reforms, including the latest tax cut proposals, could further dampen growth outlook,” said ICICI Securities Ltd in a 13 November note.
Recent high frequency data for India point to weakening economic activity, with the Index of Industrial Production (IIP) at 3.8% in September and the manufacturing Purchasing Managers’ Index (PMI) dipping to 50.3 in October.
“Rising commodity prices are impacting margins of manufacturers and business confidence continues to dip. On the flip side, rationalizing of GST rates to 18% for majority of items in the 28% bracket will be positive for demand in the consumption space, while relaxations in filing deadlines and procedures will improve business sentiment. Our outlook for Indian stocks continues to be of consolidation till clarity emerges on sustainability of growth in earnings which justify high valuations,” ICICI Securities added.
Analysts also said that along with the fiscal slippage threat, geopolitical tensions in West Asia and subdued earnings have also dented markets sentiment. “Slowdown in economy and mixed earning have hit investors’ sentiment. There is a growing consensus that the Reserve Bank of India will not be able to reduce interest rates this year on weak macro indicators. Globally, interest rates are also going to increase,” said Sachin Shah, fund (portfolio) manager, Emkay Global Financial Services Ltd.
However, Shah believes that the undertones in the market remain buoyant, while an earnings recovery is expected by the first half of fiscal 2019.
On Monday, the rupee closed at a six-week low on worries of a fiscal slippage. The currency closed at 65.43 against the dollar—a level last seen on 3 October, down 0.41% from its Friday’s close of 65.17.
Although domestic institutional investors (DII) have bought Indian shares worth Rs74,459.58 crore so far this year, they sold Rs268.77 crore worth of stocks on Monday.
Foreign institutional investors have been net sellers of Indian equities worth $7.3 billion in 2017 so far.