Benchmarks to make positive start; Services PMI eyed

Indian market ended higher with gains of over a percent each on Thursday with information technology companies and automakers pacing the gainers. Today, the start of the session is likely to be in green following positive global cues and ahead of economic data. Market participants will be eyeing the Services PMI data to be released later in the day. Some support will come with the Reserve Bank of India’s (RBI) report that bank credit and deposits grew 6.18 percent and 11 percent to Rs 102.45 lakh crore and Rs 138.67 lakh crore, respectively, in the fortnight ended June 19. Also, traders may take note of Union minister Nitin Gadkari’s statement that India needs foreign direct investments worth Rs 50 to 60 lakh crore and the money can be tapped mainly through infrastructure projects as well as MSME sector to accelerate the wheels of coronavirus-hit economy. Besides, Prime Minister Narendra Modi and Russian President Vladimir Putin discussed the coronavirus crisis and resolved to strengthen the Indo-Russia ties for jointly addressing the challenges of the post-Covid world. However, there may be some cautiousness as with nearly 22,000 cases, India has registered its biggest single-day jump in the number of coronavirus cases. The tally now stands at 627,168 and 18,225 people have died from the disease. Traders may be concerned as Care Ratings revised India's GDP growth forecast for the current financial year to (-) 6.4 percent as economic activity continues to be under restriction, due to the COVID-19 induced lockdown. The rating agency, in May, had projected a decline in GDP growth of 1.5-1.6 percent in FY21. Auto stocks will be in focus with a private report that automobile sales are likely to see a sequential improvement over the next two months even as the year-on-year decline is expected to continue up to December quarter due to disruptions related to the coronavirus pandemic. There will be some reaction in micro, small and medium enterprises (MSMEs) stocks as the RBI asked banks, financial institutions and NBFCs to reclassify MSMEs on the basis of the new criteria.

The US markets settled in green on Thursday following the release of a closely watched Labor Department report showing another record spike in employment in the month of June. Asian markets are trading higher on Friday tracking overnight gains on Wall Street.

Back home, Indian equity benchmarks ended Thursday’s session in green terrain that marked a second straight day of gain for the markets, on widespread buying amid a broad up-move in global markets following encouraging Covid-19 vaccine trials. Sensex and Nifty closed above their crucial 35,800 and 10,550 levels, respectively. Key gauges traded on positive note since the beginning, as traders took encouragement with Finance minister Nirmala Sitharaman’s statement that the government is committed to undertaking reforms to make the tax administration simple for businesses, particularly the micro, small and medium enterprises (MSMEs). Sentiments remained optimistic as the Confederation of All India Traders (CAIT) has suggested a host of measures such as technical audits and waiver of late fees, to broaden the Goods and Services Tax (GST) base and make the taxation system simple. Key indices gathered further ground in late afternoon trade, as the government approved a scheme under which the eligible non-bank lenders will be provided short-term liquidity through a special purpose vehicle (SPV) set up by the SBICAP securities, a subsidiary of the State Bank of India (SBI). Market participants also took a note of the Ministry of Finance’s latest report that the gross Goods and Services Tax (GST) revenue collected in the month of June, 2020 is Rs 90,917 crore of which CGST is Rs 18,980 crore, SGST is Rs 23,970 crore, IGST is Rs 40,302 crore (including Rs 15,709 crore collected on import of goods) and Cess is Rs 7,665 crore (including Rs 607 crore collected on import of goods). However, markets pared some gains at the end of the session, as some anxiety remained among traders with Fitch Ratings’ report stating that India's non-bank financial institutions (NBFIs) will continue to face elevated near-term risks even as economic activity picks up with the easing of the country's nationwide lockdown. Finally, the BSE Sensex gained 429.25 points or 1.21% to 35,843.70, while the CNX Nifty was up by 121.65 points or 1.17% to 10,551.70.