Benchmarks settle with minor cut

Indian equity benchmarks gave up most of their losses in last leg of trade to come off their intraday low points, but failed to erase all losses and ended with minor cut. Key indices made cautious start as total number of coronavirus cases in India has been rising constantly. Selling further crept in as SBI research report stated that with the government's Rs 20 lakh crore stimulus package, the country's fiscal deficit is likely to be more than double to 7.9% in the current financial year. Markets extended their losses in the afternoon session, after Asian Development Bank (ADB) said the global economy is expected to suffer $5.8-8.8 trillion in losses due to the coronavirus pandemic. Of this, the impact on south Asian gross domestic product (GDP) will be to the tune of $142-218 billion.

However, key indices staged a sharp recovery from the intraday losses in late afternoon session, as traders found some solace with India Inc stating that the second tranche of the stimulus package will provide relief to the most vulnerable sections of the society reeling under the impact of COVID-19 and boost the housing sector, aiding economic growth. The government announced a Rs 3.16 lakh crore package of free foodgrains for migrant workers, concessional credit to farmers and working capital loan for street vendors as part of the second tranche of fiscal stimulus to heal an economy hit hard by the lockdown. Meanwhile, the government said 2.5 crore farmers, including fishermen and those involved in animal husbandry, would get Rs 2 lakh crore of concessional credit through Kisan Credit Cards under its economic stimulus package.

On the global front, Asian markets ended mostly higher on Friday, while European markets were trading in green with investors taking comfort in China's first rise in factory output this year after it eased a coronavirus-induced lockdown. China's industrial production climbed 3.9% in April, faster than the 1.5% increase forecast by analysts. But, lingering Sino-U.S. tensions kept stocks on course for weekly declines.  Back home, power stocks were buzzing as Finance minister Nirmala Sitharaman announced a one-time emergency fund of Rs 90,000 crore to help state-owned distribution companies (discoms) pay their dues to power generating companies (gencos) and transmission companies (transcos). Aviation stocks were also in focus as rating agency ICRA stated that the domestic aviation industry, which has been impacted by coronavirus pandemic and subsequent lockdown, will require an additional funding worth Rs 32,500 to 35,000 crore during FY21-23. It also said the industry-level debt is expected to increase to Rs 465 billion (around Rs 46,500 crore) over FY 2021-22.

Finally, the BSE Sensex fell 25.16 points or 0.08% to 31,097.73, while the CNX Nifty was down by 5.90 points or 0.06% to 9,136.85.

The BSE Sensex touched high and low of 31,296.28 and 30,770.48, respectively and there were 10 stocks advancing against 20 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.31%, while Small cap index was down by 0.16%.

The top gaining sectoral indices on the BSE were Telecom up by 1.81%, Metal up by 1.61%, Energy up by 1.32%, Power up by 0.54% and Oil & Gas up by 0.48%, while Realty down by 1.42%, Bankex down by 1.09%, Auto down by 1.01%, Finance down by 0.69%, IT down by 0.64%, Consumer Disc down by 0.52% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.68%, Asian Paints up by 2.08%, Tata Steel up by 1.81%, NTPC up by 1.73% and Reliance Industries up by 1.63%. On the flip side, Mahindra & Mahindra down by 4.70%, Axis Bank down by 3.30%, Indusind Bank down by 2.24%, Hero MotoCorp down by 2.06% and Sun Pharma down by 1.63% were the top losers.

Meanwhile, Chief Economic Advisor (CEA) K V Subramanian has ruled out any impact of stimulus on the price situation and said that the COVID-19 pandemic has severely dented the demand for non-essential or discretionary goods, creating deflationary conditions. Subramanian also said that a good part of the Rs 20 lakh crore stimulus package is designed in a manner that the fiscal deficit remains under control.

He mentioned that COVID has a significant deflationary impact because demand especially for non-essential or discretionary goods and services will go down significantly. Therefore, it is unlikely that there would be too much inflationary impact through fiscal deficit or stimulus package.

Besides, he stated that the proposed stimulus package will generate demand by infusing liquidity into the system and thus perk up the economy. He said ‘a good part of stimulus is utilising leverage to deliver...while at the same time ensuring that the fiscs remain actually under control.’

The CNX Nifty traded in a range of 9,182.40 and 9,050.00 and there were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Vedanta up by 3.87%, Bharti Airtel up by 2.77%, BPCL up by 2.62%, Asian Paints up by 2.14% and Tata Steel up by 1.71%. On the flip side, Mahindra & Mahindra down by 4.64%, Zee Entertainment down by 3.63%, Axis Bank down by 3.27%, Bharti Infratel down by 3.15%, UPL down by 3.02% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 80.24 points or 1.4% to 5,821.78, France’s CAC rose 38.38 points or 0.9% to 4,311.51 and Germany’s DAX was up by 177.49 points or 1.72% to 10,514.51.

Asian markets ended mostly higher on Friday as signs of the gradual reopening of businesses across the globe, including the United States outweighed renewed worries over Sino-US trade relations. Market sentiment improved further after China reported upbeat economic data, which showing its economy is gradually recovering from the shock of the corona virus outbreak. Industrial production in China was up 3.9 percent year-on-year year in April. That exceeded expectations for an increase of 1.5 percent following the 1.1 percent decline in March. Japanese shares ended marginally higher, supported by the Japanese government’s lifting of the state of emergency over the corona virus pandemic in 39 of the country’s 47 prefectures, while Bank of Japan Governor Haruhiko Kuroda said there is no need to cut interest rates deeper into negative zone now.