Traders work on the floor as Sensex and nifty reach highest in share market Image Credit: Gulf News

Dubai: Indian stock markets were subdued on Tuesday even as oil prices fell, as economic concerns widened after the International Monetary Fund (IMF) cut growth forecasts for the Asian subcontinent.

The country’s benchmark index Sensex ended 200 points or 0.5 per cent lower, while Nifty recorded a similar sized decline to close below a crucial 12,200-point mark.

“The bears continued to dominate for a second consecutive session as IMF cut India’s GDP growth forecast,” said Ajit Mishra, vice-president of research at India-based Religare Broking, adding that he has a cautious view on the market given stretched valuations and muted start to the earnings season.

The IMF had sharply slashed its estimate on India’s 2019 economic growth to 4.8 per cent from the 6.1 per cent expansion it projected in October, citing slowing demand and stress in the non-bank financial sector. It also listed the low GDP numbers as the top drag on its two-year global growth forecast.

“Going forward, the IMF growth forecast is likely to raise hopes amongst market participants of a big bang budget and this is likely to drive momentum for some sectors in the coming sessions,” Mishra added. The budget is scheduled to be presented on February 1.

While the Indian government’s statistics department and the Reserve Bank of India (RBI) have estimated growth in 2019-20 at 5 per cent, rating agency Moody’s Investors Service has projected growth at 4.9 per cent for the fiscal.

“We think the economy will gradually build momentum over the coming months as past policy loosening takes effect,” said Darren Aw, Asia economist for Capital Economics, but said that this will add to upward pressure on core inflation and force the RBI to switch to tightening mode later this year.