Markets to get pessimistic start on Thursday

Indian markets snapped two-day losing streak and ended higher on Wednesday after the country eased some lockdown restrictions. Today, the markets are likely to make pessimistic start amid weak global cues. Rising coronavirus cases may also impact the market sentiments. The data from the Union Health Ministry said the death toll due to COVID-19 neared 1700 on May 06 with the number of infected cases nearing 50,000 in the country. As per the latest update, the number of active COVID-19 cases in India stands at 33,514 while 14,182 people have been cured and discharged, and one patient migrated. There will be some cautiousness with report that Chief economic adviser KV Subramanian said India’s gross domestic product (GDP) will contract in the first quarter, but is likely to grow 2% for the full financial year. Though, some respite may come later in the day as Niti Aayog CEO Amitabh Kant said that the government is working on a package of structural reforms across sunrise sectors to convert India into a global manufacturing and exporting hub. Also, some support may come as markets regulator Sebi gave certain relaxations to companies from compliance with procedural norms pertaining to rights issues opening up to July 31 amid the coronavirus lockdown. Meanwhile, the government has extended the last date for filing annual GST return for financial year 2018-19 by three months till September 2020. Infrastructure stocks will be in focus with CRISIL Research’s statement that the 57-day nationwide lockdown due to COVID-19 will result in a sharp 13 per cent fall in toll collections and remittances. There will be some reaction in oil marketing companies (OMCs) stocks with report that the decision by the government to raise duties on petrol and diesel and not allowing OMCs to increase retail prices might squeeze their marketing margins by about 64%. Also, sugar stocks will be in limelight with CRISIL Ratings’ statement that the operating profitability of domestic sugar mills is expected to decline by 150-300 basis points (bps) to 7.5-9.5 percent due to reduction in industrial usage of sugar, lower demand for ethanol, and fall in exports following the ongoing crisis of COVID-19 pandemic. There will be lots of earnings reaction to keep the markets buzzing.

The US markets ended mostly lower on Wednesday amid report that private sector employment plunged by 20.236 million jobs in April after slumping by a revised 149,000 jobs in May. Asian markets are trading mostly in red on Thursday as investors await the release of a private survey of China’s services activity in April.

Back home, In a volatile session, Indian equity benchmarks traded with a positive bias for most part of the day and ended with gains of over half percent, thereby snapping out of a two-day losing streak, aided by gains in Finance, Telecom and financial stocks. Markets started session on a pessimistic note, as the country remained in an extended lockdown, with few exceptions, to curb the spread of the coronavirus (COVID-19) pandemic. Traders also remain concerned as the Centre for Monitoring Indian Economy (CMIE) said the Covid-19 crisis has led to a spike in the country's unemployment rate to 27.11% for the week ended May 3, up from the under 7% level before the start of the pandemic in mid-March. Investors also took a note of Global ratings agency S&P’s report that in order to fight the COVID-19 pandemic,  additional financial stimulus is necessary in India despite the country's weak fiscal position. It mentioned that the stimulus is necessary to support the vulnerable segments of the society and also to prevent additional structural damage to the economy amid the lockdown which has suddenly stopped the business activity. But, markets recovered soon from their initial losses and entered into green terrain, taking support from the Minister for MSME and Road Transport and Highways Nitin Gadkari’s statement that the government is looking to introduce a policy on import substitution in order to replace foreign imports and boost domestic manufacturing in the wake of the current economic scenario due to COVID-19 pandemic. The market breadth remained optimistic with India's Sherpa for G20 and G7 groups Suresh Prabhu stating that the government is working on an aggressive strategy to attract FDI into India in the aftermath of COVID-19 pandemic. However, key indices pared most of their gains in dying hour of trade, as cautiousness remained among traders with data showing that India's service sector activity plummeted to a historic low in April, as strict restrictions on the movement of citizens and business shutdowns led the sector to a complete standstill. The IHS Markit India Services Business Activity Index stood at 5.4 in April, an extreme decline from 49.3 in March, and indicative of the most severe contraction in services output since records began in December 2005. Finally, the BSE Sensex gained 232.24 points or 0.74% to 31,685.75, while the CNX Nifty was up by 65.30 points or 0.71% to 9,270.90.