Fitch Ratings on India's GDP Growth, FPI Inflows in 2019, and Top Cues in Focus Today

Tue, 24 Dec Pre-Open

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India share markets ended their volatile day marginally lower yesterday.

At the closing bell yesterday, the BSE Sensex stood lower by 38 points (down 0.1%) and the NSE Nifty stood down by 6 points (down 0.1%).

Both, the BSE Mid Cap index and the BSE Small Cap index, ended their day down by 0.1%.

Sectoral indices ended on a mixed note. Stocks in the energy sector, realty sector and FMCG sector witnessed huge selling pressure, while auto stocks were trading in the green.

Top Stocks in Focus Today

From the pharma sector, Cadila Healthcare share price will be in focus today as the company announced that the United States Food and Drug Administration (USFDA) cleared its Gujarat facility.

According to the report, the USFDA issued no observation (483) at the completion of the inspection that concluded on December 20.

The inspection was going on since December 16 at the company's topical manufacturing facility in Ahmedabad.

Issuance of no observation means that the company has successfully cleared the inspection on all aspects.

Glenmark Pharma share price will also be in focus today as the company's subsidiary, Glenmark Pharmaceuticals Inc., USA is voluntarily recalling all unexpired lots of its ranitidine tablets from the US market.

These tablets are used to treat ulcers of the stomach and intestines.

The tablets are being recalled because of the presence or potential presence of N-nitrosodimethylamine (NDMA) levels above the acceptable daily intake levels established by the United States Food and Drug Administration (USFDA).

From the banking sector, market participants will be tracking Yes Bank share price after reports suggested that European entities are showing interest in the beleaguered bank.

As per the news, it was reported that European entities are showing interest in the bank as the investors are looking to invest up to US$ 1 billion.

According to report, some entities which are showing interest in the bank have large exposure to Russia, while some investors own banks having exposure in Europe.

FPIs Flock to Indian Capital Markets in 2019

Ignoring negative sentiments around falling GDP growth rate and some policy roadblocks, foreign portfolio investors seem to have flocked to the Indian capital market in a big way in 2019 with a net inflow of over Rs 1.3 trillion, including Rs 972.5 billion in equities, the highest in last six years.

As the year draws to a close, the debt market has seen a net inflow of nearly Rs 270 billion by FPIs, while a further amount of Rs 90 billion found its way to the hybrid instruments, the reports noted.

As of now, the foreign portfolio investors (FPIs) have made a net investment of Rs 1.3 trillion (nearly US$ 19 billion) in the Indian markets so far in 2019, while a few days of trading is yet to take place.

While FPIs have made gross purchases worth over Rs 18 trillion so far this year, they have sold securities worth Rs 16.7 trillion across equities, debt and hybrid instruments.

This is the second highest inflow in the last five years and follows a net outflow of close to Rs 810 billion in 2018. In 2017, the net inflow into Indian capital markets had crossed Rs 2 trillion after a net outflow of over Rs 230 billion in 2006.

For equities only, the year passing-by has already seen a net inflow of Rs 972.5 billion, the highest in six years. While the year 2018 saw a net outflow of over Rs 330 billion by FPIs in equities, there was a net inflow of Rs 510 billion in 2017, of Rs 205 billion in 2016, of Rs 178 billion in 2015 and of Rs 970.5 billion in 2014.

FPIs started the year on a negative note and pulled out over Rs 42 billion from equities in January, but turned net buyers in February and the positive momentum continued till June.

However, FPIs turned net sellers in July & August and pulled out over Rs 30 billion after the government announced a super-rich tax, which also impacted foreign funds.

Besides, global cues turned unsupportive. Further, brewing tension between US and Iran, an escalating US-China trade war and fears of slowing global growth created a risk-off sentiment, which did not augur well for emerging markets like India.

Reversing their selling spree, FPIs once again turned net buyers in September and the momentum continued till November after the government announced steps to boost the economy and spur investments.

FPIs would continue to be watchful of the domestic environment and tread cautiously.

We will keep you updated on the developments from this space.

Fitch Ratings Lowers India's GDP Growth to 4.6%

Factoring in significant deceleration in past few quarters on account of credit squeeze and deterioration in business and consumer confidence, Fitch Ratings has cut its growth forecast for India to 4.6% for the current financial year (FY20) from the previous estimation of 5.6%.

However, it expects growth to gradually recover to 5.6% in FY21 and 6.5% in FY22 with support from easing monetary and fiscal policy and structural measures that may also support growth over the medium term.

It reaffirmed India's rating at 'BBB-' with a Stable Outlook saying the rating balances a still strong medium-term growth outlook compared with similar category peers and relative external resilience stemming from solid foreign-reserve buffers against high public debt, a weak financial sector and some lagging structural factors, including governance indicators and GDP per capita.

Meanwhile, it said its rating for India incorporates the expectation of moderate slippage in the fiscal deficit target of 3.3% of GDP in FY20.

Besides, the Fitch's FY2020 growth forecast is lower than 4.9% projection by Moody's and 5.1% by Asian Development Bank.

The Reserve Bank of India (RBI) has also revised GDP growth forecast to 5% for FY20 from 6.1% projected in October.

Recently, even ratings agency Moody's Investors Service lowered GDP growth projection for India to 4.9% from 5.8% for FY20.

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