Benchmarks to make negative start; CPI data eyed

Indian markets ended higher on Tuesday with consistent foreign fund flows on the back of better-than-expected corporate earnings coupled with a sustained increase in coronavirus recoveries. Today, the markets are likely to make negative start tracking weakness in global peers. Investors will be looking ahead to the CPI inflation data for July which is released later in the day. there are expectations that India's retail inflation edged up slightly in July due to higher food prices, remaining firmly above the RBI's medium-term target of 4 per cent for a 10th straight month. Traders will be eyeing the upcoming GST Council meeting, which shall meet on only a single-point agenda, anytime in August, to iron out measures to meet the compensation requirements, is likely to discuss three top suggestions to raise compensation funds. There will be some cautiousness as India again recorded over 61,000 cases in 24 hours, taking its tally way past the 2.3-million mark. With 835 fatalities in a single day, the country's death toll has risen to 46,188, very close to the UK's toll. Market participants will be concerned with the government data showing that industrial production declined by 16.6 percent in June, mainly due to lower output of manufacturing, mining, and power generation. According to the Index of Industrial Production (IIP) data, manufacturing sector production registered a decline of 17.1 percent, while the output of mining and power fell 19.8 percent and 10 percent, respectively. Though, some support may come later in the day with a private report that the Department of Promotion of Industry and Internal Trade (DPIIT) has proposed short- and-long-term measures to turn Indian into a manufacturing hub for auto components and air conditioning. Traders may take note of a report that industry body Confederation of Indian Industry (CII) suggested an open and facilitative import environment on the lines of ASEAN, to make India an exporting hub. Banking stocks will be in focus as Fitch Ratings believes Reserve Bank of India’s (RBI) recent proposal to allow banks to restructure loans may extend uncertainty over the banking sector’s asset quality. There will be some reaction in rail-related stocks after the Railways stated that all regular passenger train services will remain suspended till further notice, although 230 special trains will continue to be in service. There will be earnings reaction based on the performance of the companies.

The US markets ended lower on Tuesday amid growing uncertainty about an additional round of US fiscal stimulus. Asian markets are trading mostly in red on Wednesday as investors continue to monitor coronavirus developments.

Back home, Indian equity markets traded with volatility but in green and ended higher on Tuesday, buoyed by banks and metal stocks amid positive cues from global peers. Sensex and Nifty closed above their crucial 38,400 and 11,300 levels, respectively. Markets had a gap up opening, supported by better-than-expected quarterly earnings together with rupee appreciation. Traders took encouragement with Commerce and Industry Minister Piyush Goyal’s statement that India's balance of payments this year is going to be very, very strong on the back of significant improvement in exports and a fall in imports. Some support also came in as Union Minister Nitin Gadkari said the government is working on the idea of a land bank and a social microfinance institution to help people run small shops and businesses. However, key gauges trimmed most of their gains to come off day’s high in afternoon session, as the Covid-19 cases continued to rise unabated. Some cautiousness prevailed with ratings agency ICRA’s report that the coronavirus pandemic will significantly impact performance of companies and it is likely to be severe and prolonged for select sectors, especially aviation, hospitality and retail. It added the pandemic, followed by extended lockdowns in India both nationally and then localised, has impacted India Inc for the major part of the first quarter of the current financial year. But, markets regained some momentum in final hour of trade, taking support from Food and Public Distribution Secretary Sudhanshu Pandey’s statement that the country's economy is reviving from the impact of COVID-19 pandemic and this is visible from the performance of sectors such as FMCG and agriculture. He said that FMCG revenues have come back to almost 85 percent of pre-COVID times, which is an important indicator. Finally, the BSE Sensex gained 224.93 points or 0.59% to 38,407.01, while the CNX Nifty was up by 52.35 points or 0.46% to 11,322.50.