Benchmarks to start new week on positive note

Indian markets pared some early gains but still ended higher on Friday, making it the third straight week to end with gains. Today, the start of new week is likely to be positive tracking firm cues from Asian peers. Traders will be getting some encouragement with report that in the fourth years of the goods and service tax (GST) regime, the government is determined to focus on the simplification of tax administration and ease of compliance for taxpayers. Some support will come with the latest data from the Reserve Bank of India (RBI) showing that after falling in the previous week, the country's foreign exchange reserves rose $1.27 billion to $506.84 billion in the week ended June 26. Investors will react to a report that farm activity has seen an uptick in June, aided by heavy rainfall, with 87% more area coming under cultivation of various key crops so far in the season compared to last year. Traders may take note that industry body Assocham has identified 15 large import items for ramping up the country's domestic capacity to achieve the objective of Aatmanirbhar Bharat or self-reliant India in 2-3 years. Meanwhile, the commerce ministry is considering to replace the multi-modal transportation of goods act with a full-fledged national logistics law with a view to promote growth of the sector. However, there may be some cautiousness with over 23,000 new cases, India has now replaced Russia as the country with third-most Covid-19 infections. The total number of coronavirus cases in India stands at 697,836 and 19,700 people have died from the disease so far. Three will be some buzz in fertiliser stocks with the government’s statement that fertiliser sales jumped 83% in April-June to record 111.61 lakh tonnes despite the nationwide lockdown to curb the spread of coronavirus. Banking stocks will be ion focus as the finance ministry may assess the capital requirement of public sector banks after the September quarter as there would be greater clarity about a spike in bad loans by that time. There will be some reaction in the aviation stocks with ICRA’s report that the recommencement of commercial passenger flight services in a graded manner is unlikely to help the domestic aviation industry recover in the current financial year with domestic air traffic expected to shrink by 41-46% and international travel demand by a negative 67-72% Y-o-Y owing to COVID-19.

The US markets were shut on Friday for Independent Day. Asian markets are trading in green on Monday as investors counted on super-cheap liquidity and fiscal stimulus to sustain the global economic recovery.

Back home, Indian equity benchmarks settled on a positive note with gains of over half percent on Friday after a largely volatile trade session, boosted by rupee’s gain against the US dollar as well as positive leads from Asian markets. Key indices took gaining streak to third straight session, recapturing their crucial 10,600 (Nifty) and 36,000 (Sensex) bastions. Markets made positive start, as traders took encouragement with union finance and revenue secretary Ajay Bhushan Pandey’s statement that that the GST information technology (IT) system is quite robust as more than 46 crore tax returns have been filed through the system in last three years, which has helped in making the historical indirect tax reform a success. Some support also came as 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. Barometer gauges extended their gains in late morning deals, as traders remained enthusiastic with the World Bank’s statement that it will provide a $750 million budget support to 15 lakh MSMEs to increase liquidity access for viable small businesses impacted by COVID-19. The $750 million support is in addition to the $2 billion funding the World Bank has already announced for the social and health sector. Sentiments remained positive with reports that India's first indigenous Covid-19 vaccine (BBV152 COVID vaccine) may be launched by August 15. The Indian Council of Medical Research (ICMR) has written to select medical institutions and hospitals to fast-track clinical trial approvals for the vaccine. However, markets pared some gains in late trade as a private sector survey showed India's crippled services industry, the lifeblood of economic growth and jobs, contracted sharply in June as an extended lockdown imposed to stop the spread of the coronavirus stalled business activity. Although the pace of decline moderated from May - the Nikkei/IHS Markit Services Purchasing Managers' Index jumped to 33.7 in June from May's 12.6 - it remained a long way from the 50-mark separating growth from contraction. Finally, the BSE Sensex gained 177.72 points or 0.50% to 36,021.42, while the CNX Nifty was up by 55.65 points or 0.53% to 10,607.35.