Benchmarks to make optimistic start of Tuesday

Indian markets witnessed bloodbath and ended lower on Monday as weak earnings reports from the markets heavy weights likes of RIL, HUL and Tech Mahindra coupled with rising US-China tensions over coronavirus. Today, the markets are likely to make optimistic start mirroring firm global cues. Some support will come with report that the RBI is considering a proposal for extending the moratorium on bank loans by another three months to help people and industry impacted by the ongoing lockdown to contain COVID-19, with further extension of the nationwide lockdown. Traders may take note of report that market regulator SEBI has said that entities providing capital and debt market services will continue to remain operational during the nationwide lockdown which has been extended for another two weeks to contain the spread of Covid-19. Though, traders may be concerned with report that with 2,573 fresh novel coronavirus cases reported in the last 24 hours, India's total Covid-19 count surged to 42,836, according to the latest Ministry of Health and Family Welfare. The death toll also increased to 1,389 after 83 positive patients succumbed to the highly contagious disease. There may be some cautiousness as domestic rating agency Icra estimated that the country's GDP might contract by as much as 20% in the June quarter and is expected to overcome some lost ground in the remainder of the year but still close 2020-21 down by up to 2%. Also, India’s budget gap for the year ended March 31 has touched 4.4% of gross domestic product, breaching the target set in February as an economic slowdown reduced tax collections. Power stocks will be in focus with report that lower consumption in April dipped 22.75% to 85.05 billion units (BU) compared to 110.11 BU in the same month a year ago, mainly due to low demand amid the lockdown to combat COVID-19. There will be some reaction in insurance companies stocks with a private report that the motor and health segments led the decline in premiums for the industry as the month saw premium fall by 9%. While motor segment saw a 7% decline in premiums, health registered an 11% decline in premiums. There will be lots of earnings reaction based on the performance of the companies.

The US markets ended higher on Monday as the lifting of lockdowns in some US states boosted optimism. Asian markets are trading in green on Tuesday, with major markets closed for holidays, after tech shares and oil rose on easing coronavirus restrictions and prospects of an economic recovery.

Back home, pausing four-day gaining streak, Indian equity benchmarks ended Monday’s session sharply bearish with losses of around six percent, tracking weak cues from overseas, that fell on fresh cues of US-China trade war. Domestic indices opened deep in the red, as the government extended the lockdown for another two weeks in an attempt the arrest the spread of coronavirus. Sentiments also remained dampened with government data showing that India’s core sector output contracted 6.5% in March, marking the worst performance by the key infrastructure areas going back to 2005, as the nationwide lockdown to combat the spread of Covid-19 stalled the economy. Weak company results have also kept investors on the edge as companies keep posting sharp profit drops in the March quarter. The bourses continued to bleed further in late hour of trade and ended near day’s low point, as Indian manufacturing activity growth declined sharply in the month of April 2020, amid national lockdown restrictions to help stem the spread of the coronavirus disease 2019 (COVID-19), which in turn led to widespread business closures. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 27.4 in April from 51.8 in March. Adding to the pain, the CEOs Snap Poll survey conducted by the Confederation of Indian Industry (CII) stated that the lockdown imposed to prevent the spread of COVID-19 has had an impact on economy and industries in the country due to which the majority of the firms are anticipating a significant decline in their top line, and foresee a delay in economic revival and demand recovery. Finally, the BSE Sensex lost 2002.27 points or 5.94% to 31,715.35, while the CNX Nifty was down by 566.40 points or 5.74% to 9,293.50.