Benchmarks to make cautious start amid weak macro-economic data

Indian markets reversed gains and ended sharply lower on Monday after tensions between India and China border near Ladakh escalated. Today, the markets are likely to get a cautious start amid mixed global cues coupled with weak macro-economic data. Investors will be eyeing the Manufacturing PMI data to be out later in the day. The implementation of the new margin rules from today is also expected to impact the market trend. Traders will be concerned with report that India's economy suffered its worst slump on record in April-June, with the gross domestic product (GDP) contracting by 23.9% as the coronavirus-related lockdowns weighed on the already-declining consumer demand and investment. There will be some cautiousness with report that the output of eight core infrastructure industries tumbled by 9.6%, for the fifth consecutive month in July, due to the decline mostly in production of steel, refinery products and cement. Market participants may also react to the rising coronavirus cases in the country. India has recorded over 68,000 new cases of coronavirus in the past 24 hours, taking its total caseload to 3,687,939. Meanwhile, the Union Government's fiscal deficit overshot the budget target for the current financial year within four months (April-July), mainly on account of the impact of lockdown on revenue collections. Though, some support may come later in the day with report that the RBI will conduct a simultaneous purchase and sale of government securities under open market operation (OMO) for an aggregate amount of Rs 10,000 crore on September 03, 2020. The Reserve Bank of India (RBI) as part of its measures to foster orderly market conditions has also announced that it will conduct additional special open market operation, involving the simultaneous purchase and sale of government securities for an aggregate amount of Rs 20,000 crore in two tranches of Rs 10,000 crore each. There will be some buzz in the telecom stocks as Justice Arun Mishra-led Supreme Court bench will pronounce the much awaited Adjusted Gross Revenue dues' verdict relating to telecom companies later in the day. Metal stocks will be in focus after Miners' body FIMI urged the government to introduce a mechanism to monitor the price and sale of domestic steel, which has witnessed a steep rise in recent months. There will be some reaction in fertiliser industry related stocks as India Ratings and Research (Ind-Ra) in a report said India's fertiliser sales are likely to grow 10-15 percent in 2020-21, however, the momentum seen in first half of the fiscal is likely to moderate during the second half. The auto sector stocks will also be in action, reacting to their monthly sales numbers.

The US markets ended mostly in red on Monday as worries about US-China tensions and reports showing a surge in new coronavirus cases in several states across America weighed on sentiment. Asian markets are trading mixed on Tuesday amid new Federal Reserve comments that suggested rates will stay low for an extended period.

Back home, snapping their six-session winning run, Indian equity benchmarks ended Monday’s session near day’s low with massive losses of over two percent, amid reports of a fresh border flare-up between India and China. Indian markets opened trade on a strong note, as traders took support with report that the Ministry of Home Affairs (MHA) has issued new guidelines for opening up of more activities in areas outside the Containment Zones. In Unlock 4, which will come into effect from September 1, 2020, the process of phased re-opening of activities has been extended further. Under the new guidelines, states are not to impose any local lockdown (State/ District/ sub-division/City/ village level), outside the containment zones, without prior consultation with the central government. Some buoyancy also came with Public Enterprises Selection Board (PESB) chairman Rajiv Kumar’s statement that central public sector enterprises, which have a combined net worth of close to Rs 12 lakh crore, can boost India's GDP by 2-3 percent by leveraging funds and stepping up capital expenditure. However, local indices wiped out all of their morning gains and slumped sharply in afternoon trade, as market participants remained on sidelines ahead of gross domestic production (GDP) data, scheduled to be released later in the day. Sentiments remain dampened with private report stating that India's fiscal deficit is expected to touch 7 percent of GDP in 2020-21 fiscal as against budget estimate of 3.5 per cent, with revenue collections being hit amid disruptions in economic activities due to lockdowns. Adding to the pessimism, apex exporters body FIEO has expressed concerns over freezing of bank accounts of some exporters by the Enforcement Directorate (ED) without giving any warning, hearing or reasons, and has sought Commerce Ministry's intervention in the matter. Finally, the BSE Sensex lost 839.02 points or 2.13% to 38,628.29, while the CNX Nifty was down by 260.10 points or 2.23% to 11,387.50.