Markets to get cautious start; manufacturing PMI eyed

Indian markets wiped out early gains and ended slightly lower on Tuesday ahead of Prime Minister Narendra Modi's address to the nation. Today, the start of July month is likely to cautious amid mixed economic data coupled with rising coronavirus cases in the country. India has yet again recorded more than 18,000 cases in 24 hours, taking its total number of coronavirus cases to 585,792. Around 17,400 people have died from the fatal disease. Investors will be eyeing the manufacturing PMI for June which is slated to be released later in the day. Traders will be concerned as Fitch Ratings lowered India's growth forecast for 2021-22 fiscal to 8 percent from 9.5 percent projected last month. The rating agency retained its projection of Indian economy contracting by 5 percent in the current fiscal. Market participants may react to the government data showing that output of the 8 core sectors of the economy shrank by 23.4 per cent in May, as factories remained hamstrung by a lack of labour and cash in the wake of the nationwide coronavirus (Covid-19) lockdown. Also, the finance ministry’s report stated that the government's total liabilities increased 0.8 percent to Rs 94.62 lakh crore at March-end 2020 as compared to the preceding quarter. Though, some support may come as the data released by the Reserve Bank of India (RBI) showed that India's current account balance recorded a marginal surplus in the January-March quarter of FY20. Meanwhile, the report released by the Centre showed that India's fiscal deficit for the first two months of the fiscal year 2020-21 has come in at around 4.66 lakh crore. There will be some buzz in the auto stocks as automobile firms will report their June sales figures beginning today. Banking stocks will be in focus as S&P Global Ratings said the coronavirus pandemic may push back the recovery of India's banking sector by years, which could hit credit flows and, ultimately, the economy. There will be some reaction in automotive component sector stocks as CRISIL Ratings in its report said that supply chain disruptions in the wake of COVID-19 outbreak coupled with weak demand for vehicles in India and overseas is likely to squeeze the revenue of the automotive component sector by 16 percent this fiscal.

The US markets ended higher on Tuesday as traders continued to express optimism about the economic outlook despite the continued spike in new coronavirus cases across several states. Asian markets are trading mostly in green on Wednesday following overnight gains on the Wall Street.

Back home, in spite of trading positive for most part of the day, the Indian equity benchmarks gave up their gains and ended flat with a negative bias, on the back of concerns over rising COVID-19 cases and its impact on economic recovery. Key indices kicked off session on higher note, tracking firm cues from global peers. Traders also took encouragement with Union minister Mahendra Nath Pandey’s statement that the government has approved the third phase of skill development scheme, Pradhan Mantri Kaushal Vikas Yojana (PMKVY), with an increased focus on digital technology and industry 4.0. Traders also were taking support with report that India has been holding up better in hiring than other economies as the COVID-19 pandemic has caused disruptions across the globe with reports of layoffs, furlough and organisations freezing their hiring intentions across sector. Indian bourses continued to show positive trend in afternoon session, taking support from report that India has finally developed its first indigenous COVID-19 vaccine named COAXING. A Hyderabad-based company called Bharat Biotech has achieved this success in collaboration with the Indian Council of Medical Research (ICMR) and National Institute of Virology, Pune. The recently developed coronavirus vaccine has got the approval for human trials by the Drug Controller General of India (DCGI). However, markets failed to maintain their gaining momentum in late afternoon session and ended with minor cut, as traders turned cautious with India Ratings and Research (Ind-Ra) in its latest report stated that the gross state domestic product (GSDP) of all states in India is likely to contract in the range of 1.4 to 14.3 percent in the current financial year (FY21) due to the impact of Covid-19-induced lockdown on economic activities. Finally, the BSE Sensex lost 45.72 points or 0.13% to 34,915.80, while the CNX Nifty was down by 10.30 points or 0.10% to 10,302.10.