Benchmarks likely to make optimistic start

Indian markets gave up intraday gains and ended sharply lower on Tuesday as markets succumbed to heavy selling pressure in the last hour of trade amid weak cues from European markets. Today, the start of session is likely to be optimistic following Asian peers. Traders will be getting some encouragement with the Department for Promotion of Industry and Internal Trade’ (DPIIT) data showing that Cayman Islands has emerged as the fifth largest investor in India, with foreign direct investment (FDI) from the nation increasing over three-fold to $3.7 billion in 2019-20. Some support will also come with report that the Ministry of Corporate Affairs (MCA) has amended the Companies (Share Capital and Debentures) Rules, 2014, to allow startups to issue sweat equity shares not exceeding 50 per cent of its paid-up capital up for a decade after the registration of the firm. Traders may take note of report that sectors expected to lead the job market in the third quarter (July-August-September 2020) of the current calendar year are mining & construction, finance, insurance and real estate. Though, there may be some cautiousness with report that the total number of coronavirus cases in India has jumped to 276,146, while 7,473 people have died from the disease so far. Now only a notch behind the UK in terms of number of confirmed coronavirus, India at present is the fifth-most-affected country. Meanwhile, markets regulator SEBI has eased norms related to fast track further public offers, including reducing the minimum average market capitalisation of public shareholding requirement, till March next year. There will be some buzz in the insurance companies stocks with IRDAI’s report that the nationwide lockdown due to the coronavirus outbreak that began on March 25 continued to have an impact on the new premium collections of life insurers with first-year collections down 25.4 percent year-on-year (YoY) to Rs 13,739.01 crore in May 2020. Auto stocks will be in focus with rating agency Ind-Ra’s report that the automobile sales may decline by up to 25 percent in this financial year as compared to 2019-20 due to a complete washout in April and minuscule sales last month. There will be some reaction in aviation stocks with Global airlines body IATA’s statement that airlines across the world are expected to lose $4.3 billion in 2020 due to the coronavirus pandemic, calling it the worst year in the history of aviation.

The US markets ended mostly lower on Tuesday as traders cashed in on the strong gains posted in recent sessions. Asian markets are trading mostly higher on Wednesday ahead of the release of Chinese inflation data for May.

Back home, in a volatile session, Indian equity benchmarks erased all of the day's gains and ended near day’s low point with losses of over a percent on Tuesday, as sharp selling pressure in Telecom and Banking stocks dragged the markets lower. After making slightly positive start, equity gauges turned cautious, as the World Bank said that India's economy will shrink by 3.2 percent in the current fiscal, as it joined a chorus of international agencies that are forecasting a contraction in growth rate due to the coronavirus lockdown halting economic activity. But, markets soon gained traction and traded in fine fettle as traders took encouragement with the Reserve Bank of India (RBI) proposed a comprehensive framework for sale of loan exposures, which could be standard, sub-standard or non-performing assets (NPAs), as part of the overall exercise to deepen the market for lending. Some optimism also came as Finance Minister Nirmala Sitharaman said the government will consider an extension in the deadline for availing the lower 15 percent corporate tax rate on new investments, due to the COVID-19 pandemic. However, markets failed to hold on to gains and slipped into red terrain in the final hour of trade, as traders turned wary with global rating agency S&P Global Ratings in its report titled 'Financial Conditions Reflect Optimism, Lockdown Fatigue Emerges', stating that Indian economy is likely to shrink 5 per cent in the current fiscal, saying the fiscal stimulus worth 1.2 per cent of GDP will not be enough to provide significant growth support. Selling further crept in as global ratings agency Moody's Investors Service said that India's sovereign rating downgrade has created six ‘fallen angels’, or companies in the non-financial sector whose ratings have dipped to just one notch away from being considered junk. Companies that move from investment grade category to sub-investment grade are sometimes referred as ‘Fallen Angels’. Finally, the BSE Sensex lost 413.89 points or 1.20% to 33,956.69, while the CNX Nifty was down by 120.80 points or 1.19% to 10,046.65.