Markets trade higher in early deals; IT stocks lead

Indian equity benchmarks made slightly positive start on Thursday following overnight gains on Wall Street. Markets soon turned volatile and are trading higher with notable gains in early deals. Buying in IT, TECK and Energy stocks are aiding the domestic indices. Broader indices underperformed larger peers, as they are trading lower. Sentiments got boost as India recorded a trade surplus in June for the first time in more than 18 years. India's exports stood at $21.91 billion in June, while imports at $21.11 billion in June, leaving a trade surplus of $0.79 billion, compared to a deficit of $15.28 billion in the same month of the last year. Adding optimism, former RBI Governor Raghuram Rajan said the government should focus on spending on profitable firms, which have been incurring costs but have not earned revenues in the last four months. Traders took note that global rating firm S&P Global applauded the decision of India banks to raise fresh capital stating that the move will provide solidity to the organisations during these rocky times and assist them to withstand the economic slump amid the coronavirus pandemic. Though, lackluster Asian cues coupled with rising coronavirus cases dampened the sentiments in markets. India has recorded over 32,000 Covid-19 cases in the past 24 hours - its biggest single-day spike yet - to take its total number of coronavirus cases to 970,169. With over 600 deaths on Wednesday, the country's Covid-19 death toll has now reached 24,929.

On the global front, most of the Asian markets are trading lower despite the positive cues overnight from Wall Street and data showing that China's economy rebounded more than expected in the second quarter. Investors remained cautious due to the rising number of coronavirus cases worldwide, including a record single-day spike in new COVID-19 cases in the US Worries about rising tensions between the US and China also dampened sentiment.

Back home, some of the sugar stocks are trading in green as a group of ministers, headed by Home Minister Amit Shah, recommended increasing the minimum selling price (MSP) of sugar by Rs 2 to 33 per kg to ensure mills clear the pending cane arrears of around Rs 20,000 crore at the earliest. In scrip specific developments, Infosys jumped over 10% after it beat forecasts to report a smaller-than-expected 2% decline in June quarter profit, and surprised markets by giving full-year constant currency revenue growth guidance. On the other hand, Titan Company declined. The company said it is expecting its businesses to be hit very substantially in the current financial year due to the lockdown necessitated by the Covid-19 pandemic.

The BSE Sensex is currently trading at 36267.64, up by 215.83 points or 0.60% after trading in a range of 36038.41 and 36409.79. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.30%, while Small cap index was down by 0.76%.

The few gaining sectoral indices on the BSE were IT up by 6.16%, TECK up by 4.69%, Energy up by 0.27%, while Telecom down by 1.65%, Power down by 1.57%, FMCG down by 1.52%, Utilities down by 1.44%, Basic Materials down by 1.22% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 10.48%, TCS up by 4.06%, HCL Technologies up by 3.67%, Tech Mahindra up by 1.18% and Reliance Industries up by 0.89%. On the flip side, ITC down by 2.75%, NTPC down by 1.93%, Power Grid down by 1.93%, Titan Company down by 1.74% and HDFC down by 1.63% were the top losers.

Meanwhile, Crisil Research in its latest report has said that Indian airlines are staring at a massive revenue loss of Rs 1.1-1.3 lakh crore over three financial years, including the current fiscal (FY21), due to the coronavirus pandemic which has led to visa and travel restrictions, thereby severely affecting aviation industry across the world. It said airlines are unlikely to recover this loss as growth is not expected to return to pre-pandemic levels of double-digit increase at least in the medium term.

The report said one would have assumed that the expected plunge in crude oil prices to $38-42 per barrel in fiscal 2021 compared with $64-66 per barrel in fiscal 2020 would have helped airline companies to an extent on the margin front as it forms a sizeable 30-45 percent of an airline's cost base. However, it said because of the outsized impact of the demand destruction, airlines are curtailing capacity deployment, thereby restricting opportunities to accrue the benefit of low crude oil prices.

According to the report, airlines are projected to post losses at Ebitdar as well as Ebitda levels in fiscal 2021 as fixed costs, such as lease rentals, employee expenses and maintenance tasks, had to be met even when the airplanes were grounded. It also said curtailed mobility of people due to the COVID-19 pandemic and related restrictions will shrink domestic air passenger traffic by 40-45 per cent and international traffic by 60-65 per cent, respectively, this fiscal. It added that with the COVID-19 pandemic still raging in much of the world, a revival to pre-pandemic levels appears unlikely even next fiscal.

The CNX Nifty is currently trading at 10654.05, up by 35.85 points or 0.34% after trading in a range of 10595.20 and 10708.60. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Infosys up by 10.60%, TCS up by 4.04%, HCL Technologies up by 3.68%, Tech Mahindra up by 1.12% and Reliance Industries up by 1.03%. On the flip side, Bharti Infratel down by 3.06%, IOC down by 2.98%, ITC down by 2.87%, UPL down by 2.41% and Zee Entertainment down by 2.15% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 declined 155.06 points or 0.68% to 22,790.44, Straits Times slipped 13.79 points or 0.52% to 2,635.11, Hang Seng dropped 298.50 points or 1.17% to 25,183.08, Taiwan Weighted lost 77.40 points or 0.63% to 12,125.45, KOSPI fell 12.89 points or 0.59% to 2,188.99 and Shanghai Composite was down by 47.27 points or 1.41% to 3,314.03, while Jakarta Composite added 20.97 points or 0.41% to 5,096.77.