Markets likely to get flat-to-negative start on Friday

Indian markets ended sharply higher on Thursday after the Reserve Bank of India (RBI) left interest rates unchanged, as widely expected, and maintained an accommodative stance as long as it is necessary to revive growth and mitigate the impact of Covid-19 on the economy. Today, the start of session is likely to be flat-to-negative mirroring lackluster cues from Asian peers. Rising coronavirus cases may dampen sentiments. India has recorded its worst-ever spike of 62,170 case in a single day. With this, India's tally of total cases has crossed the 2-million mark to now stand at 2,025,409. The death toll has soared to 41,627. There will be some cautiousness with a private report that business optimism for the July-September quarter slumped to a record low due to sharp rise in COVID-19 cases, the extension of lockdown in containment zones and staggered easing of restrictions. However, some respite may come later in the day as Union Minister Jitendra Singh said India will be an important pillar of the post-coronavirus global economic recovery and that the road map for winning the battle against the pandemic lies in countries restarting the economy and strengthening cooperative federalism. Some support may come with a private report that the Centre is looking to expand the scope of its Production-Linked Incentive (PLI) scheme to a few more sectors. The Finance Ministry, NITI Aayog and line ministries are reportedly discussing the PLI scheme for sectors such as chemicals, fertilisers, solar equipment including solar cells, power equipment sector, electirc vehicle (EV) components (batteries, auto parts). The 2-wheeler stocks will be in limelight as ratings agency ICRA revised downwards sales forecast for two-wheelers in India, expecting it to decline by 16-18 percent to around 1.7 crore units in FY2021. Home loan companies stocks will be in focus as the RBI announced an additional special liquidity facility (ASLF) of Rs 10,000 crore equally split between Nabard and the NHB to help small financiers and home loan companies amid COVID-19 difficulties. There will be some reaction in logistics sector stocks as ICRA revised the outlook on the logistics sector from stable to negative given the prevailing circumstances and its near impact on the industry metrics. Meanwhile, Mindspace Business Parks REIT is all set to debut on the bourses today. The Rs 4,500-crore IPO was subscribed 13 times during July 27-29. There will be some result announcements to keep the markets in action.

The US markets ended higher on Thursday as investors hoped for a new fiscal stimulus package. Asian markets are trading in red on Friday as investors await several economic data releases for July.

Back home, Indian benchmark indices came off highs but still closed out a volatile day with gains of around a percent each on Thursday, on the back of value buying by fund and retail investors in the select blue chip counters amid firm global cues. Frontline gauges surged above their crucial 38,000 (Sensex) and 11,200 (Nifty) levels. Markets made an optimistic start and traded in fine fettle, as traders took 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. Sentiments also remained positive with the Department for Promotion of Industry and Internal Trade’s (DPIIT) statement 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. Key gauges added more strength in afternoon session to trade near day’s high point, after the Reserve Bank of India (RBI), in its second bi-monthly policy for financial year 2020-21 (FY21), has kept the repo rate unchanged in the August policy. With no change this time, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent. The central bank has maintained its policy stance at ‘accommodative’ which could continue for as long as necessary to revive growth. The RBI also announced several additional measures to accelerate the economy, enhance liquidity, improve the flow of credit and deepen digital payment facilities, among others. However, in final hour of trade, markets gave up some of their initial gains, as some concern came with RBI Governor Shaktikanta Das’ statement that the country’s headline inflation is expected to remain elevated during the second quarter of the current fiscal year and may subside thereafter. He also said domestic food inflation remains elevated across most economies since the onset of the pandemic. Finally, the BSE Sensex gained 362.12 points or 0.96% to 38,025.45, while the CNX Nifty was up by 98.50 points or 0.89% to 11,200.15.