Benchmarks to make flat-to-negative start of new week

Indian markets settled higher on Friday with notable gains amid positive global cues and hopes of a V-shaped recovery in earnings growth in the second half of fiscal year 2020-21. Today, the markets are likely to make flat-to-negative start of new week amid mixed cues from Asian peers. There will be some cautiousness with Worldometer report that India went past the 4 lakh-mark on June 21 with the biggest single-day spike of 15,915 new infections, while the death toll rose to 13,294. However, some respite may come later in the day with Chief Economic Advisor Krishnamurthy V Subramanian’s statement that demand in the economy will increase when the uncertainty regarding health in the wake of COVID-19 outbreak ends. Some support may also come with the Reserve Bank of India’s (RBI) data showing that India's forex reserves rose substantially by $5.942 billion to touch a life-time high of $507.644 billion in the week to June 12, helped by a significant jump in the foreign currency assets (FCA). Traders may react to the report that foreign portfolio investors (FPI) have infused a net Rs 17,985 crore into the Indian capital markets in June so far amid increasing liquidity and higher risk appetite. Meanwhile, Prime Minister Narendra Modi met with the ministers and top officials from infrastructure and commerce ministries, to discuss ways to boost local manufacturing and exports amid continuing tensions with China. There will be some buzz in the banking stocks with the latest data from the RBI showing that bank credit and deposits grew 6.24 per cent and 11.28 per cent to Rs 102.54 lakh crore and Rs 139.55 lakh crore, respectively, in the fortnight ended June 5. Aviation stocks will be in focus as Civil Aviation Minister Hardeep Singh Puri expects the domestic market to return to full capacity by the end of the year, but sees little chance of international travel reopening anytime soon with border restrictions in place. There will be some reaction in power stocks with report that intense heat wave during the third week of June has helped further narrowing of power demand slump to 9.76% from 10.5% in the previous week, showing commercial and industrial activities are yet to reach optimum levels.

The US markets closed mostly lower on Friday, after the World Health Organization signaled that the coronavirus pandemic remains a deadly threat. Asian markets are trading mixed on Monday as rising coronavirus cases in the United States raised more doubts about a quick economic rebound from the massive downturn triggered by the pandemic.

Back home, extending northward journey for second straight session, Indian equity benchmarks ended Friday’s session with gains of over one and half percent each, propelled by stellar gains in index-heavyweight Reliance Industries amid positive sentiment in global markets and fresh foreign fund inflows. Key indices made positive start and managed to keep heads above water, as traders took some support 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. Buying further crept in as United Nations Conference on Trade and Development (UNCTAD) 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). Domestic indices extended their upside in late afternoon session, taking support from report that opening of the coal sector to private players will generate jobs, reduce dependence on fuel import, stimulate the economy and catalyse the country's path towards a $5-trillion economy. Adding to the optimism, State Bank of India’s (SBI) chairman Rajnish Kumar said that there is enough liquidity available in the system and also interest rates have moderated to a large extent. He further states that both the RBI and the government have taken measures to bring back the economy, derailed by the pandemic, back on track. Traders ignored Asian Development Bank (ADB) in a supplement to its Asian Development Outlook (ADO) has forecasted that the Indian economy is expected to contract by 4% during the current financial year, hit hard by the COVID-19 pandemic. It added that countries in ‘Developing Asia’ will ‘barely grow’ in 2020. However, it also said China is expected to record a positive growth of 1.8% in 2020, sharply down from 6.1% in 2019. Finally, the BSE Sensex gained 523.68 points or 1.53% to 34,731.73, while the CNX Nifty was up by 152.75 points or 1.51% to 10,244.40.