Benchmarks to make gap down opening amid sell-off in global peers

Indian markets ended flat on Thursday after banks slip in-trade, dragged by index heavyweights like ICICI Bank, Kotak Mahindra Bank and HDFC while IT stocks capped losses. Today, the start of session is likely to be gap-down following sell-off in the global markets. Traders will be concerned with ICRA’s report that corporate revenues declined by 31 per cent in the June quarter, but profit margins decreased by a lesser degree to 3.6 per cent in the April-June period. Rising coronavirus cases is also likely to impact the markets. India has recorded its highest-ever single-day spike in new coronavirus cases, of over 84,000. The total now stands at 3,933,124. Investors will be looking ahead to the 15th Finance Commission meet, which is likely to meet today, to discuss the dwindling economic growth, tax collection, GST compensation to states, revenue deficit grant and fiscal consolidation. Though, some respite may come later in the day as Prime Minister Narendra Modi invited US companies to invest in India by taking advantage of its stable tax regime and attractive Foreign Direct Investment (FDI) policies. Traders may take note of report that Union Finance Nirmala Sitharaman has asked banks and NBFCs to support borrowers and that COVID-19 related distress must not impact the lenders’ assessment of their creditworthiness. There will be some buzz in the banking stocks as Fitch Ratings said private sector banks, with stronger loss-absorption buffers, are likely to gain market share from their state-owned peers in the medium term. there will be some reaction in jewellery industry related stocks with the Gem and Jewellery Export Promotion Council’s (GJEPC) statement that gems and jewellery exports are projected to decline by 25-30 per cent in the current fiscal as there was a complete washout of the first quarter due to lockdown to curb spreading of the COVID-19.

The US markets settled lower on Thursday as investors dumped the high-flying technology sector. Asian markets are trading in red on Friday tracking sharp declines on Wall Street overnight.

Back home, Indian equity benchmarks settled with minor cut on Thursday after fluctuating between gains and losses during the session, following weak Asian equities. Trade was largely range-bound for most part of the session owing to volatility as weekly index future and option contracts expired today. Markets made positive start and managed to trade above their neutral lines, as traders took some support with report that India has moved four places on the Global Innovation Index (GII) 2020 to rank at 48 since 2019. This makes it the third-most innovative lower middle-income economy in the world. India at the 48th place also retains the highest rank in the central and southern Asia region. However, markets witnessed some selling activity in afternoon deals, as traders turned wary with Federation of Indian Export Organisations (FIEO) stating that the government's decision to cap export incentives under the Merchandise Exports from India Scheme (MEIS) at Rs 2 crore per exporter on exports made between September 1, 2020 to December 31, 2020 is going to seriously affect traders and cause uncertainty. However, key gauges once again entered into green terrain in late afternoon session, amid the latest IHS Markit Services Purchasing Managers' Index (PMI) indicated a slower rate of decline in business activity across the Indian service sector during August. The ongoing coronavirus pandemic 2019 (COVID-19) restrictions continued to adversely impact client demand and business operations. New business and output continued to contract at marked rates, albeit slower than the records seen in April and May. But, markets failed to hold gains and ended marginally lower, as rising coronavirus cases in the country dampened sentiments in the markets. Meanwhile, the 15th Finance Commission will hold a meeting with its economic advisory panel on Friday to discuss issues of GDP growth, GST compensation and fiscal consolidation. Finally, the BSE Sensex fell 95.09 points or 0.24% to 38,990.94, while the CNX Nifty was down by 7.55 points or 0.07% to 11,527.45.