Markets to open in red; IIP, CPI data eyed

Indian markets wiped out early gains and ended lower on Monday dragged down by financials. Today, the markets are likely to make negative start following weakness in Asian peers and ahead of the macro-economic data. Investors will await the industrial production data for March and consumer inflation for April, slated to be announced later in the day. Traders will be concerned amid report that the nationwide lockdown may extend amid a rise in virus-infected cases. Prime Minister Narendra Modi has told the state chief ministers that the lockdown may have to continue after May 17. Covid-19 cases in India have seen a dramatic surge in the past two weeks. The total number of corona cases rose to 70,768 as of May 12 morning and death toll hit 2,294. India at present is the 11th most affected among 187 countries with coronavirus cases. Also, there will be some cautiousness as a foreign brokerage in its report estimated that the fiscal deficit to come at 5.8% of the GDP in FY21 as against the budget target of 3.5%, after the government's move to raise its market borrowing programme for the current financial year by Rs 4.2 lakh crore. Though, traders may get some encouragement with Union minister Nitin Gadkari’s statement that he expects the Centre to unveil a financial package in two-three days, observing that the situation was very bad despite the three-month moratorium on loan repayments announced by the RBI. Some support may come with report that the government released Rs 6,195.08 crore to 14 states as the second equated monthly installment of the Post Devolution Revenue Deficit Grant on May 11. Traders may take note of report that Chief Economic Advisor Krishnamurthy Subramanian said that according to data obtained after analyzing GST figures and e-bills economic activity has resumed up to 40 per cent of pre-lockdown times in the third phase of the lockdown. Auto stocks will be in focus with report that India's automakers have warned that total automobile sales could fall as much as 45% in the current fiscal year in a worst-case scenario as economic growth slumps due to the COVID-19 pandemic, and they are seeking government help through the crisis. There will be some reaction in media stocks with Crisil’s report that the media and entertainment sector is expected to witness 16% decline in revenue for FY21, due to fall in advertisement and subscription income in the wake of coronavirus-induced lockdown. There will be some earnings announcements too to keep the markets buzzing.

The US markets ended mostly higher on Monday as traders continued to express optimism about a quick economic recovery as some states around the US have already begun to reopen. Asian markets are trading in red on Tuesday as investors await the release of Chinese inflation data expected to be out later in the day.

Back home, Indian equity benchmarks traded with a positive bias for most part of the day but selling activity which took place during dying hour of trade mainly forced the markets to cut all of their gains and ended Monday’s session marginally in red. The benchmarks staged a gap up opening, tracking gains in Asian peers. Traders took encouragement with report that the government is working on several initiatives, such as preparation of huge land pools, to attract potential investors to India amid the coronavirus-triggered turbulence. Indian indices climbed off the session's top but were still trading over half a percent higher in afternoon session, as some optimism remained among traders with report that in view of the impact of lockdown on tax collection and need to garner additional resources to fight the menace of coronavirus, the government has substantially increased its market borrowing programme for the current financial year (FY21) by about 54 percent or Rs 4.2 lakh crore to Rs 12 lakh crore, a development that will have severe implications for the fiscal deficit. Though, key indices failed to hold initial gains and traded in red in last hour of trade amid cooling off buying interest across sectors. Traders turned wary with Former chief economist of World Bank -- Kaushik Basu’s statement that India needs a large fiscal stimulus as the country faces big risk of slowdown in the economic growth on account of COVID-19. Basu suggested that the government may need monetisation by the Reserve Bank of India. Traders also took a note of report that as many as 401 infrastructure projects, each worth Rs 150 crore or more, have been hit by cost overruns of over Rs 4.06 lakh crore owing to delays and other reasons. Finally, the BSE Sensex lost 81.48 points or 0.26% to 31,561.22, while the CNX Nifty was down by 12.30 points or 0.13% to 9,239.20.