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Business News/ Markets / Stock Markets/  Markets rally fizzle out after 2% gain on firm global shares
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Markets rally fizzle out after 2% gain on firm global shares

BSE Sensex ends at 31,561.22, down 81.48 points, or 0.26%; 50-share Nifty at 9,239.20, down 12.30 points, or 0.13%
  • Indian rupee closes at 75.74 per dollar, down 0.24%
  • Domestic investors are worried about the government’s revised borrowing calendar. (Photo: Mint)Premium
    Domestic investors are worried about the government’s revised borrowing calendar. (Photo: Mint)

    Indian stock markets rally fizzled out towards end of trading session after a 2% gain on Monday. As countries worldwide are opening up activities after lockdown, there were also warnings of new rise in infections in few countries. This has added to the uncertainty in markets. The BSE Sensex ended at 31,561.22, down 81.48 points or 0.26% while the 50-share index Nifty was at 9,239.20 down 12.30 points or 0.13%.

    Stocks in other parts of Asia were mostly higher on Monday as hopes rise on economies reopening, even as US reported record job losses in April. Markets in Hong Kong and Japan were up over 1%. MSCI’s Asia-Pacific shares outside Japan firmed 1.1%.

    Positive attempts made towards the US- China trade talks added to global markets sentiment, said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd. “Further the government is likely to announce stimulus package this week which will be largely addressed towards MSMEs. However, concerns of higher slippages in the banking sector dragged the market in second half. Speedy rise in the coronavirus cases in the country is also a concern in the market. In the near-term, we expect the market to swing either ways depending upon the spread and intensity of covid-19 cases, development around vaccine and incremental government/ regulatory actions to restart the economy," he added.

    Domestic investors are also worried about the government’s revised borrowing calendar. The government, on late Friday, announced that it will borrow 12 trillion in FY21, a sharp increase from the original budget estimate of 7.8 trillion (by 2% of gross domestic product).

    The government’s decision to finally raise its market borrowings by over 2% of GDP signals its acceptance that the fiscal deficit will slip by materially more than is allowed under the escape clause, said analysts. “It also signals that a second fiscal support package is around the corner. While this suggests a FY21 fiscal deficit of 5.5-6.0% of GDP, we expect the central government’s fiscal deficit to expand to 7.0% of GDP in FY21, double its original target," said Nomura.

    Nomura has sharply cut projection for real GDP growth in FY21 to -5.2% year-on-year from -0.4%. It expects year-on-year growth to remain negative for three consecutive quarters – with growth faltering to 1.5% YoY in Q1 2020 (January-March) before plunging to -14.5% in Q2.

    Meanwhile, Indian rupee closed at 75.74 per dollar, down 0.24%. The 10-year bond yield rose 20 basis points, its biggest jump since 8 February 2017 to close at 6.16%.

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    Published: 11 May 2020, 07:19 PM IST
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