Benchmarks to make positive start on Tuesday

Indian markets ended lower on Monday, with banks suffering heavy losses amid the RBI's warning about rising bad loans due to the coronavirus pandemic. Today, the markets are likely to get optimistic start tracking positive global cues. Traders will be getting some encouragement as RBI Governor Shaktikanta Das made a strong case for stepping up investments in the infrastructure sector to restart the economy reeling under the impact of the COVID-19 pandemic. Some support will also come with Commerce and Industry Minister Piyush Goyal’s statement that the government will soon set up a single window system for clearances and approvals for industry, and is working on creating a land bank with a view to attract investments. Besides, the Finance Ministry said the Centre has released over Rs 1.65 lakh crore as GST compensation to states for 2019-20 financial year, including Rs 13,806 crore for March. Though, rising coronavirus cases may impact the markets. India recorded over 45,000 coronavirus cases in the past 24 hours, taking its total to 1,482,503. The country's current Covid-19 death toll stands at 33,448. There may be some cautiousness with 15th Finance Commission Chairman N K Singh’s statement that India will see a sharp V-shaped recovery in the third and fourth quarter of the current fiscal, but FY21 GDP growth would ultimately be in negative territory as the coronavirus lockdown led to serious demand and supply dislocations. Pharma stocks will be in focus as the central government launched four schemes of Department of Pharmaceuticals for promotion of domestic manufacturing of bulk drugs and medical devices parks in the country. There will be some reaction in PSU stocks with Finance Minister Nirmala Sitharaman’s statement that the government is working on completing the stake sale process of about 23 public sector companies whose divestment has already been cleared by the Cabinet. There will be earnings announcements too, to keep the markets in action.

The US markets ended higher on Monday as investors weighed progress in US government stimulus efforts against rising Covid-19 cases. Asian markets are trading mostly in green on Tuesday as investors continue to monitor developments over coronavirus vaccine.

Back home, Indian equity benchmarks ended Monday’s trade on a pessimistic note, with Sensex and Nifty settling below their crucial 37,950 and 11,150 levels, respectively. Markets made slightly positive start but soon fell sharply as banking shares came under intense selling pressure after the Reserve Bank of India on Friday warned that the bad loan ratio in the banking industry could rise to at least 12.5 per cent by March 2021, from 8.5 per cent in March 2020. Also, RBI in its half-yearly Financial Stability Report said that the exact duration of how long COVID-19 pandemic will last is still uncertain, therefore the downside risks to growth remain significant in FY21. Traders were also cautious with report that foreign portfolio investors (FPIs) remained net sellers in Indian markets in July so far on account of both domestic and global factors, including rising number of coronavirus cases and increasing tension between the US and China. Benchmarks continued to trade lower in late afternoon session, as private report stated that Indian economy is likely to face inflationary pressures in the near term, as factors like supply chain disruption and lack of low-wage workers are expected to offset the deflationary pressures from subdued demand in the economy. However, further losses got restricted as Union Minister Nitin Gadkari termed India as the best destination for foreign investment with high returns, and urged European investors to invest in India. He said the government is looking at LNG as fuel for trucks and buses in transport on long routes of more than 700 to 800 km. In addition, it is promoting ethanol to reduce Rs 7 lakh crore annual import of crude. Apart from LNG, he said the government's focus is to take ethanol economy from the present Rs 20,000 crore to Rs 1 lakh crore. Traders also took note of Chemicals and Fertilisers Minister D V Sadananda Gowda’s statement that the government is taking measures for ease of doing business in the fertiliser sector and to ensure smooth supply of soil nutrients to farmers. Finally, the BSE Sensex fell 194.17 points or 0.51% to 37,934.73, while the CNX Nifty was down by 62.35 points or 0.56% to 11,131.80.