Benchmarks to make positive start ahead of RBI’s MPC meeting outcome

Indian equity indices were volatile in trade before closing flat on Wednesday. Today, the markets are likely to get positive start following firm cues from global markets. Investors will be eyeing ahead of the Reserve Bank of India's (RBI) three-day monetary policy meeting outcome today. Traders will be taking encouragement with Director General of Foreign Trade Amit Yadav’s statement that the Directorate General of Foreign Trade will realign itself along the lines of Prime Minister’s Make in India and will push for production of items domestically to cut down imports. The organisation is focusing on creating more capacities within the country to produce items that can cut down imports and accelerate exports from the electronics and hardware sector, including ventilators. He also said that the government-run agency is also taking suggestions from the industry and others as to the areas which promise new capacities to reduce import and accelerate exports. Some support may come as the Department for Promotion of Industry and Internal Trade (DPIIT) said that it will rope in a consulting agency to scrutinise tenders of government procuring entities for compliance with public procurement regulations that aim at promoting 'Made in India' products. The DPIIT has floated a notice inviting request for proposal (RFP) from interested agencies. Meanwhile, state Bank of India Chairman Rajnish Kumar said the government and corporates must work together for a quick economic recovery. He added that investment in infrastructure, in particular, should be stepped up. There will be some buzz in stocks of Medical device industry as Medical Technology Association of India (MTaI) said Medical technology industry has suffered around 50-85 percent drop in revenue during April-June with a decline in surgical procedures at hospitals due to COVID-19 situation. There will be some reaction in stocks of Aluminium industry as the Aluminium Association of India (AAI) said that blocking of the online system for exporters to apply for tax incentives under the export incentive scheme MEIS has created an extremely precarious situation for aluminium exports. It added the move will further render exports vulnerable and uncompetitive. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets closed higher Wednesday, supported by hopes for progress toward another fiscal relief package in Congress and better than expected corporate earnings results. Asian markets are trading mostly in green in early deals on Thursday amid encouraging reports for a Covid-19 vaccine.

Back home, equity benchmark indices erased the stellar gains made at open and ended Wednesday’s session on flat note, weighed down by blue-chips such as Reliance Industries (RIL), HDFC Bank and Power Grid. Initial rally was largely attributed to strong trend in Asian markets' indices and sustained foreign fund inflows. Traders also took encouragement with the Department of Economic Affairs in its monthly macroeconomic report stating the worst may now be over for India and the road ahead will take the economy back on the track. The sentiments remained up-beat with the Minister of State for Commerce and Industry Hardeep Singh Puri’s statement that immediate review of the Association of Southeast Asian Nations (ASEAN)-India trade in goods agreement would help realise the true bilateral trade potential between India and the 10-member Southeast Asian bloc. He said it will also contribute to the realisation of 2020 trade target of $200 billion set by both parties. However, domestic stock markets lost momentum and turned highly volatile in afternoon session, as survey report showed India’s service sector remained sluggish in the month of July, with substantial reductions in both activity and inflows of new work were recorded, as ongoing lockdown restrictions stifled demand and forced companies to cease operations. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index was at 34.2 in July from 33.7 in June. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services - was at 37.2 in July from 37.8 in June. Some pessimism also came with ICRA’s report where it mentioned that the securitisation volumes are estimated to significantly drop to Rs 1.2-1.3 lakh crore during the current fiscal due to the impact of COVID-19 and lower availability of eligible loan pools for securitisation. Finally, the BSE Sensex lost 24.58 points or 0.07% to 37,663.33, while the CNX Nifty was up by 6.40 points or 0.06% to 11,101.65.