Benchmarks to make cautious start mixed Asian cues

Indian markets ended higher with notable gains on Thursday, with heavyweight Reliance Industries and banks leading the surge despite mixed cues from global cues. Today, the markets are likely to make cautious start amid mixed cues from Asian peers and India-China border tensions continued. Rising coronavirus cases may also impact the sentiments as India has added nearly 14,000 cases of coronavirus in 24 hours, taking its total to 367,264. There will be some cautiousness as the Asian Development Bank projected India's economy to contract by four per cent in the current financial year against its earlier prediction of a growth of four per cent as measures to contain Covid-19 have significantly disrupted activities. Traders will be concerned with Icra’s report that earnings of India Inc fell by nearly a fourth in January-March as compared to the year-ago period due to legacy problems, warning of deeper impact in the June quarter due to Covid-19-induced lockdown. Absolute earnings of the corporate India contracted by 22% and 12% in Q4FY20 and FY20, respectively. However, traders may take encouragement with Prime Minister Narendra Modi’s statement that economic indicators show that India is ready for a swift bounce back as business activity and demand are back to the level seen before the Covid-19 pandemic. Some support may also come with report that the government is working on steps to reduce import dependence on China and boost domestic manufacturing. Besides, the United Nations Conference on Trade and Development (UNCTAD) has said that India’s economy could prove the most resilient in South Asia and its large market will continue to attract market-seeking investments to the country even as it expects a dramatic fall in global foreign direct investment (FDI). There will be some buzz in the coal stocks as  Prime Minister Narendra Modi launched the first-ever coal auction for commercial mining, ending the monopoly of Coal India in a bid to curb import dependence despite having the fourth-largest reserves in the world. There will be some reaction in sugar stocks with Food Secretary Sudhanshu Pandey’s statement that the government is considering a proposal to increase the minimum selling price (MSP) of sugar from Rs 31 per kg in order to help millers clear cane dues of about Rs 22,000 crore to farmers.

The US markets ended mostly higher on Thursday as traders digest a mixed batch of US economic data. Asian markets are trading mixed on Friday as investors continued to monitor the situation surrounding a recent uptick in coronavirus cases in some countries.

Back home, Indian equity benchmarks ended Thursday’s session near day’s high with a gain of over two percent each, on the back of strong buying in banking, financial and metal stocks despite weak cues from global markets. Key bourses started the day on tepid note, as border tensions between India and China continued to simmer while COVID-19 infections surged. But, markets soon inched higher and traded in fine fettle as traders found some support with Federation of Indian Export Organisations (FIEO) President S K Saraf’s statement that the ongoing India-China border tensions may not have any immediate impact on the bilateral trade relations. Some optimism also came as Prime Minister Narendra Modi told the Chief Ministers of 14 States and the Lieutenant-Governor of a Union Territory to think about Unlock 2, following the graded opening of economic activities under Unlock 1 since June 1. Markets extended northward moment in the last leg of trade, as investments through participatory notes (P-notes) in the domestic capital market rose to Rs 60,027 crore till May-end, making it the second consecutive monthly increase. Sentiments also remained buoyant with report that the finance ministry has released Rs 15,187 crore to 28 states as grants to rural local bodies to help them restart economic activity. The basic grants can be used by the local bodies for location-specific felt needs, except for salary or other establishment expenditure. Investors paid no heed towards global rating agency Fitch Ratings’ report in which it has revised India's outlook to 'negative' from 'stable', stating that the coronavirus pandemic has significantly weakened the country's growth prospects for the year and exposed the challenges associated with a high public-debt burden. Finally, the BSE Sensex gained 700.13 points or 2.09% to 34,208.05, while the CNX Nifty was up by 210.50 points or 2.13% to 10,091.65.