Benchmarks to make pessimistic start of new week

Indian markets ended higher on Friday after the Reserve Bank of India (RBI) announced another round of measures to help fight liquidity crisis amid coronavirus lockdown. Today, the start of new week is likely to be pessimistic amid weak cues from Asian peers. Investors are also eyeing Q4 result for the Infosys which is slated to be out later in the day. Traders will be concerned with report that expecting a major global recession due to the coronavirus pandemic, the World Bank said that its estimates suggest a much deeper economic downturn than the 2007-09 Great Recession. Rising coronavirus cases in India also is likely to impact investors’ sentiment. The total number of confirmed cases of coronavirus disease (COVID-19) infection in India crossed topped 16,000 on April19, while the death toll crossed the 500-mark as well. Also, there will be some cautiousness as the government is unlikely to exempt GST on medical items like ventilators, PPEs, masks, test kits and sanitisers, as it would lead to blocked input tax credit (ITC), thereby increasing the cost of manufacturing and increase the price for consumers. Besides, foreign portfolio investors (FPIs) have withdrawn a net Rs 12,650 crore from the Indian capital markets between April 01-17 amid the coronavirus crisis. Though, in the country, lockdown will be eased in areas with no new cases for coronavirus, as said by the government earlier. This could bring some relief amongst investors. Some support will come with report that to curb opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic, the government has amended the Foreign Direct Investment (FDI) policy 2017. According to new revised policy, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route. There will be some buzz in the power stocks with a private report that the Union Cabinet is likely to approve a package for discoms reeling under revenue loss due to lower power demand amid the coronavirus lockdown, including setting up of an alternative investment fund to pay off their dues towards electricity generation companies. Metal stocks will be in focus as the Indian Steel Association (ISA), which represents major public and private sector steel companies, forecast that steel demand would contract 7.7% in 2020 in the wake of measures taken to contain the spread of Covid-19 pandemic.

The US markets ended higher on Friday following a report of promising early data related to a potential coronavirus treatment from Gilead Sciences (GILD). Asian markets are trading mixed on Monday as investors awaited the release of China’s loan prime rate, which is set to be out, with a cut expected by traders.

Back home, Indian equity benchmarks traded in green terrain throughout the day and saw a strong relief rally in final hour of trade which helped to close the session at intraday high levels on Friday. With that, the markets extended their gaining streak for the second straight session, recapturing their crucial 31,550 (Sensex) and 9,250 (Nifty) bastions. Key indices staged a gap up opening, taking cues from gains in global markets. Sentiments remained up-beat with report that Prime Minister Narendra Modi reviewed the impact of COVID-19 on the Indian economy and a possible second stimulus to boost sectors hit hard by the pandemic. Modi held discussions with Finance Minister Nirmala Sitharaman as the pandemic hit sectors from small industries to the aviation sector hard with millions of jobs at stake. However, markets gave up some of gains in noon trading, as some concern came with SBI Research's Ecowrap report that India’s Gross Domestic Product (GDP) growth may slide to 1.1% in the current financial year (FY21), due to the impact of coronavirus (COVID-19) outbreak on the economy. Though, benchmark indices witnessed a sharp surge to reach at fresh intraday high points in last leg of trade, as investors’ sentiment was buoyed after the Reserve Bank of India (RBI) announced a slew of measures to infuse liquidity in the financial system including a cut in the reverse repo rate, Rs 50,000-crore targeted long-term repo operations (TLTRO) and refinancing facilities for Nabard, Sidbi and NHB. In order to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4 percent to 3.75 percent with immediate effect. Markets were also supported by RBI Governor Shaktikanta Das’ statement that there are a few slivers of brightness amidst the encircling gloom and hoped that India will stage a sharp V-shaped recovery in 2021-22 as projected by the International Monetary Fund (IMF). Finally, the BSE Sensex gained 986.11 points or 3.22% to 31,588.72, while the CNX Nifty was up by 273.95 points or 3.05% to 9,266.75.