Benchmarks to make pessimistic start amid Indo-China conflict

Indian markets ended in green on Tuesday following global markets after the US Federal Reserve outlined plans to buy individual corporate bonds to help prop up the economy amid the coronavirus pandemic. Today, the start of session is likely to be pessimistic amid escalation of border tensions between India and China coupled with weakness in Asian peers. Rising coronavirus cases in India may also impact the sentiments in the markets. The total number of coronavirus cases in the country has reached 354,161, and nearly 11,921 have died from the disease. Traders will be concerned with report that gross tax collection fell 31% till June 15 of the current fiscal, with advance corporate tax mop-up declining 79%. During the first two months of the June quarter, a nationwide lockdown was in place aimed at controlling the spread of the coronavirus pandemic. This had resulted in shuttering of around 80 per cent of the country’s economic activities. Though, some support may come later in the day with Prime Minister Narendra Modi’s statement that the economy is showing green shoots as the country emerges from the coronavirus lockdown and asserted that the fight against the pandemic is a fine example of cooperative federalism where the Centre and the states are working together. Meanwhile, India may impose anti-dumping duty on Chinese antibacterial drug Ciprofloxacin Hydrochloride with a view to guard domestic industry from cheap imports from the neighbouring country. Aarti Drugs had filed the application for imposition of anti-dumping duty on imports of the medicine from China. Banking stocks will be in limelight as hearing in the interest waiver case is scheduled in the Supreme Court today. There will be some buzz in the MSME stocks as the Finance Ministry said that public sector banks have disbursed Rs 16,031.39 crore till June 12, under the Rs 3-trillion Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector, adversely affected due to Covid-19 crisis. There will be some reaction in jewellery stocks with the Gem and Jewellery Export Promotion Council’s (GJEPC) statement that the overall gems and jewellery exports during April-May declined 82.31% to Rs 4,328.54 crore following lockdown in various parts of the world to curb the spread of COVID-19.

The US markets ended higher on Tuesday following the release of a report from the Commerce Department showing retail sales rebounded by much more than anticipated in the month of May, as stores began to reopen following the coronavirus lockdown. Asian markets are trading mostly in red on Wednesday as the International Monetary Fund said the global economy is set to see a more significant contraction than it previously forecast.

Back home, Indian equity indices traded in green terrain for most part of the day and ended with gains of over a percent on Tuesday, amid a rebound in global equities after the Fed Reserve's fresh move to support financial markets. Key indices opened majorly bullish, as traders took encouragement with the UN Conference on Trade and Development (UNCTAD) in its latest ‘The World Investment Report 2020’ stated that India was the 9th largest recipient of foreign direct investments (FDI) in 2019, with 51 billion dollars of inflows during the year, an increase from the 42 billion dollars of FDI received in 2018 when India ranked 12 among the top 20 host economies in the world. It also said a lower but positive economic growth in India in the post-COVID19 pandemic period and India's large market will continue to attract market-seeking investments to the country. Traders also took note of an article published in the monthly bulletin of the Reserve Bank which suggested that the government will have to chart out a fresh glide path to bring down the fiscal deficit once the normalcy is restored. However, the indices gave up their gains and turned sharply volatile during the early afternoon deals, amid escalating tension with China after a ‘violent face-off’ on the Ladakh border. Traders were also anxious with the data released by the Commerce and Industry Ministry showing that contracting for the third straight month, India's exports declined 36.47 percent in May to $19.05 billion, mainly on account of drop in shipments by key sectors such as petroleum, textiles, engineering, gems and jewellery. Imports too plunged 51 percent to $22.2 billion in May, leaving a trade deficit of $3.15 billion, compared to $15.36 billion in the same month previous year. But, the frontline indices recovered some steam in final hour of trade and ended over a percent, taking support from the Finance Ministry’s statement that public sector banks have disbursed Rs 16,031.39 crore till June 12, under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector, adversely affected due to COVID-19 crisis. Finally, the BSE Sensex gained 376.42 points or 1.13% to 33,605.22, while the CNX Nifty was up by 100.30 points or 1.02% to 9,914.00.