Domestic indices trade in fine-fettle in early deals on vaccine hopes

Indian equity benchmarks made optimistic start on Wednesday and gained traction heading towards north, mirroring positive global cues amid hopes of potential coronavirus vaccine. Markets are trading in fine-fettle with gains of over a percent each in early deals, after the Indian Council of Medical Research (ICMR) said that two indigenous vaccine candidates for Covid-19 will enter human trials this month. Gains in the markets led by buying at IT, TECK and Metal counters. Broader indices are also trading in line with larger peers with gains of around a percent each. Sentiments got a boost with Commerce and Industry Minister Piyush Goyal’s statement that the government is working on creating a genuine single window clearance mechanism and mapping the entire land bank available for the industry and industrial development. Meanwhile, former Reserve Bank Governor D Subbarao said that the government needs to build on some silver linings in the farm sector, driven by the prospect of a favourable monsoon, to speed up the economic recovery. Traders took note of a private report stating that the RBI to slash up to 75 bps -- 25 bps on August 6 and another 50 bps in October, if the COVID-19 is brought under control by October. However, India has recorded nearly 29,000 Covid-19 cases in the past 24 hours, taking its total number of Covid-19 cases to 937,487. With over 550 deaths on Tuesday, the country's death toll has now reached 24,315.

On the global front, most of the Asian markets are trading higher following the positive cues overnight from Wall Street and on optimism about a potential coronavirus vaccine. Biotech firm Moderna said its experimental vaccine for COVID-19, mRNA-1273, showed it was safe and produced strong immune responses in all 45 patients in an ongoing early-stage human trial.

Back home, auto stocks were in focus with SIAM’s statement that India's auto sales volume will take another 3-4 years to reach 2018 levels, as the coronavirus-induced lockdown hurt monthly revenue and increased pressure on a sector already reeling from poor demand. In scrip specific developments, Wipro surged over 13% after reporting better-than-expected quarterly numbers. Infosys gained over 2% ahead of the announcement of its June quarter results later in the day. Besides, Reliance Industries was trading higher ahead of its 43rd Annual General Meeting which will be held via videoconferencing later in the day.

The BSE Sensex is currently trading at 36466.37, up by 433.31 points or 1.20% after trading in a range of 36297.65 and 36487.12. There were 28 stocks advancing against 2 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.96%, while Small cap index was up by 0.97%.

The top gaining sectoral indices on the BSE were IT up by 2.65%, TECK up by 1.97%, Metal up by 1.86%, Bankex up by 1.58%, Power up by 1.28%, while Telecom down by 0.83% was the sole losing index on BSE.

The top gainers on the Sensex were Tech Mahindra up by 3.94%, Axis Bank up by 3.55%, Infosys up by 2.91%, Tata Steel up by 2.79% and Bajaj Finance up by 2.54%. On the flip side, Bharti Airtel down by 1.05% and ITC down by 0.26% were the only losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has said that private sector’s capital expenditure (capex) is set to contract by 20-26 percent in the current financial year (FY21) due to COVID-19 pandemic-led business disruptions. It also warned that in the absence of a broad-based pickup in domestic and external demand, faster resolution of stressed assets and deep structural reforms, private sector investments are unlikely to recover meaningfully before FY25. It noted that in fact, the pandemic outbreak and ensuing national lockdowns have crippled the economy, making coprorates and individuals risk averse.

As per the report, as uncertainties around demand recovery have persisted and the deleveraging process is yet to kick start, the private sector capex growth has remained mute or low – clocking only 5 percent annual growth since FY17. It said since then, growth in overall gross fixed capital formation continued to fall over FY18-FY19. It also stated that corporates' capacity utilisation level continues to hover below 75 percent since the last round of growth capex between FY12 and FY14. Weak demand growth, even prior to the pandemic outbreak, resulted in shortfalls in cash flow generation, thus delaying their deleveraging.

The report further said that while capacity utilisation will take at least another four years to peak, broad-based deleveraging will take another six to seven years and this will have the maximum impact on capex this year, which may contract by 20-26 percent due to the COVID-19-led business disruptions, before growing 15-20 percent next fiscal year. It noted that expecting low capex intensity sectors to be early movers and capital intensive sectors to see prolonged wait.

The CNX Nifty is currently trading at 10727.60, up by 120.25 points or 1.13% after trading in a range of 10683.45 and 10741.45. There were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were Wipro up by 12.98%, Tech Mahindra up by 3.79%, Axis Bank up by 3.58%, Infosys up by 2.76% and Tata Steel up by 2.54%. On the flip side, Bharti Airtel down by 1.25%, IOC down by 0.69%, Shree Cement down by 0.65%, Dr. Reddy’s Lab down by 0.33% and UPL down by 0.33% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 surged 293.54 points or 1.30% to 22,880.55, Straits Times jumped 24.22 points or 0.92% to 2,644.41, Taiwan Weighted rose 31.68 points or 0.26% to 12,240.69, KOSPI gained 9.76 points or 0.45% to 2,193.37 and Jakarta Composite added 9.24 points or 0.18% to 5,088.36. On the other hand, Hang Seng dropped 140.55 points or 0.55% to 25,337.34 and Shanghai Composite was down by 47.41 points or 1.39% to 3,367.21.