Benchmarks to make flat-to-negative start

Indian markets ended higher for a fourth straight session on Tuesday amid buying across the board despite rising coronavirus cases in the country. Today, markets are likely to make flat-to-negative start on concerns about rising coronavirus cases in India. India has again seen a sharp spike in the number of coronavirus cases, with its total rising to 456,115. Around 14,483 people have died in the country from Covid-19 so far. Investors will be concerned with Chief Economic Advisor Krishnamurthy V Subramanian’s statement that shutting the doors to other countries will not help India, amid the current anti-Chinese sentiment triggered by the Sino-India border tension and talks of an import substitution policy. However, traders may take encouragement later in the day as the Finance Ministry cited green shoots of recovery in agriculture, manufacturing and services sectors, and said the prompt policy measures taken by the government and RBI have helped reinvigorate the economy with minimal damage. Some support may also come with Union Minister Nitin Gadkari’s statement that integrated approach to transportation system, diversification of agriculture into energy and power, and development of industrial clusters outside metro cities are the need of the hour to boost the Indian economy. Meanwhile, the market regulator SEBI has eased preferential allotment rules for fund-raising by stressed companies, and also granted eligible companies exemption from making an open offer. There will be some buzz in the aviation stocks with report that India may soon allow airlines from the US, France, UK, Germany among others to operate flights to and from India for approved categories of passengers. Auto stocks will be in focus with Fitch Ratings’ statement that auto volumes are expected to recover partly in the second half of the ongoing financial year as sales gradually increase after the easing of lockdown measures since May. There will be some reaction in the IT stocks with ICRA’s statement that the temporary suspension of H1-B and L-1 visas by the US is a mildly negative development for the Indian IT companies as their dependence on permits has gone down lately. Insurance stocks will be in limelight as IRDAI allowed the health and general insurers to offer short-term health insurance policies that will give coverage against the coronavirus infection.

The US markets ended higher on Tuesday as White House trade adviser Peter Navarro clarifyed his remarks about the US-China trade deal. Asian markets are trading mostly in green on Wednesday amid US assurances that the China trade deal was intact.

Back home, rising for the fourth straight session, Indian equity benchmarks ended Tuesday’s session near day’s high level, following reports that Indian and Chinese armies reached a consensus to de-escalate tensions on the border. Positive cues from global markets and sustained foreign fund inflow also kept investor sentiment higher. Key indices made an optimistic start, as traders took encouragement with Niti Aayog Vice Chairman Rajiv Kumar’s statement that India will transform into a middle-income country from a lower middle-income economy by 2030. Kumar also said that India will witness a recovery in investment cycle by April 2021 and beef up efforts on trade front as well. However, the stock markets soon turned cautious with report that Moody's Investors Service has projected that the Indian economy to shrink 3.1% in 2020 and said clashes with China on the border also suggest rising geopolitical risks in the Asian region where countries are particularly vulnerable to changes in geopolitical dynamics. But, key gauges regained traction in late morning deals, as sentiment got a boost with Commerce and industry minister Piyush Goyal’s statement that India's exports in the first two weeks of June have reached above 80% level of the same period last year and would be only 10-12% lower in the month compared to June 2019. Market-men also took support from the Fitch Ratings’ report that India is very likely to come out with another round of fiscal stimulus package, worth about 1 percent of Gross Domestic Product (GDP) in the coming months. Fitch, which recently revised India's sovereign rating outlook to 'negative' from 'stable', said it has factored in the outgo for additional fiscal stimulus while deciding on the rating action. Buying got intensified in late afternoon session, taking support from private report stated that even though India relies sizeably on Chinese imports, there are 40 sectors where domestic substitutes do exist and switching part of the requirements to local alternatives can reduce the trade deficit with the northern neighbour by $8.5 billion in a single year. Finally, the BSE Sensex gained 519.11 points or 1.49% to 35,430.43, while the CNX Nifty was up by 159.80 points or 1.55% to 10,471.00.