Indian markets to start session in red territory; IIP data eyed

Indian markets ended sharply higher on Thursday with financials and metal stocks gaining ground ahead of the start of corporate earnings season amid positive global cues. Today, the markets are likely to get negative start amid weakness in the global markets and ahead of Index of Industrial Production (IIP) data, which is scheduled to be announced post market hours. Rising coronavirus cases is likely to dampen the sentiments in the markets. India has recorded over 25,500 new coronavirus cases in a day, taking its total to 794,842. The country's Covid-19 death toll has reached 21,623. There will be some cautiousness with a private report that India's GDP will contract by 3 percent in FY21 because of the coronavirus pandemic, assuming the economy is opened up fully from next month. It also said the RBI will monetise the fiscal deficit through purchase of government bonds of up to $95 billion through open market operations, and its revaluation reserves of $127 billion may also be used to recapitalise state-run banks. However, some respite may come later in the day as Principal Economic Adviser Sanjeev Sanyal said that the government will undertake measures to boost demand and there is both monetary and fiscal headroom available. He stated that economic activity is steadily getting back on track. Sanyal indicated that the Reserve Bank of India (RBI) may cut interest rates further as a monetary policy tool to improve demand. Traders may take note of report that Prime Minister Narendra Modi, in an effort to woo global investors, said that India has massive opportunities in various sectors such as defence, agriculture, and MSMEs. He emphasized on the opportunity that India provides, being one of the fastest-growing economies in the world. Auto stocks will be in focus with Crisil Research’s report that the coronavirus pandemic-induced nationwide lockdown is expected to squeeze automotive aftermarket spending by 11 per cent this fiscal. There will be some reaction in pharma stocks with Indian Pharmaceutical Alliance’s (IPA) statement that Indian pharma industry is committed to an uninterrupted supply of quality medicines to patients in India and globally. There will be lots of earnings reaction based on the performance of the companies.

The US markets ended mostly in red on Thursday as the relentless surge in coronavirus cases across America raised fears of another lockdown in several states and dimmed prospects for a quick economic recovery. All the Asian markets are trading lower on Friday following overnight weak trade on Wall Street.

Back home, Indian equity benchmarks have showcased a strong performance on Thursday, by gaining over a percent in the session and settling above the psychological 10,800 (Nifty) and 36,700 (Sensex) levels. Markets made an optimistic start and stayed in green for whole day, as traders took encouragement as Cabinet approved the development of affordable rental housing complexes (ARHCs) for urban migrants and poor as a sub-scheme under the Pradhan Mantri (PM) Awas Yojana. This initiative was first announced by Finance Minister Nirmala Sitharaman as part of the Atmanirbhar Bharat package in May. Sentiments remained up-beat with a private report that hiring activities in June remained muted on a year-on-year basis, but registered an increase over the previous month amid nationwide relaxations of coronavirus-induced lockdown norms. Markets extended their northward moment in the last leg of trade, taking support from Prime Minister Narendra Modi’s statement that Indian economy has started seeing green shoots of recovery and that the country remains one of the most open economies in the world. He said that in these times when the world is battling the COVID-19 pandemic, it is natural to talk about revival and there is faith that the story of global revival will have India playing a leading role. Adding to the optimism, Union Cabinet has given its approval to new pan India Central Sector Scheme-Agriculture Infrastructure Fund, in order to provide a medium - long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support. Traders took note of report that the National Association of Software and Services Companies (Nasscom) has launched Nasscom Launchpad in New Jersey, to promote cross border trade through partnerships. Finally, the BSE Sensex gained 408.68 points or 1.12% to 36,737.69, while the CNX Nifty was up by 107.70 points or 1.01% to 10,813.45.