Indian stock markets look set for some relief rally on Monday after finance minister Nirmala Sitharaman announced a slew of measures after the market hours on Friday, including rollback of the enhanced super-rich tax on foreign and domestic equity investors imposed in the Union Budget 2019, in order to revive growth momentum in the Indian economy.
The benchmark S&P BSE Sensex and the Nifty 50 indices had fallen nearly 2% last week, marking losses for the second consecutive week, on the back of slowdown fears. The broader markets were deeper in the red, with the Nifty Midcap index down 3% and Smallcap index losing 4% last week.
However, the withdrawal of enhanced surcharge on the long-term as well as short-term gains made by foreign portfolio investors (FPIs) and domestic investors is expected to stop the FPI outflow that started after the budget last month. In July, FPIs turned net sellers to the tune of Rs 2,985.88 crore after being net buyers for five consecutive months before the budget.
Banking stocks may also get a boost from the Centre’s announcement of immediate recapitalisation of Rs 70,000 crore for public sector banks. The decision to pass on rate cuts to the borrowers through repo rate or benchmark-linked loan products may also help credit growth, thereby helping banking stocks.
Auto stocks should also be in focus today as Sitharaman announced a series of measures to help the ailing industry. Additional depreciation of 15%, taking the total to 30%, on vehicles purchased up to March 2020 is expected to boost the commercial vehicle industry. Revision of one-time registration fees deferred till June 2020 may also improve short-term demand in the market.
Investors will also be looking at the August sales data for the auto sector which will also be announced on Sunday.
The markets, however, could see some volatility mid-week ahead of the expiry of August futures and options contracts on Thursday. Also, the ongoing US-China trade tensions may put a brake on any significant rally in equities. Not to forget, India’s gross domestic product (GDP) growth number for the June quarter will be announced on Friday. Amid the deepening slowdown that is being grappled by the Indian economy, any adverse news on that front may severely dent market sentiment.
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