Markets likely to make flat-to-positive start on Wednesday

Indian markets gave up most of their early gains and ended slightly higher on Tuesday in spite of positive global cues following impressive German data, positive news on the coronavirus front and signs of progress in U.S.-China trade negotiations. Today, the start of session is likely to be flat-to-positive following overnight gains on Wall Street. Traders will be getting some encouragement as Moody's Investors Service said India, China and Indonesia will be the only G-20 emerging economies to post a strong enough pick up of real GDP in the second half of 2020, and retained its projection of 3.1 per cent growth contraction for India in 2020. Some support will also come with Finance Minister Nirmala Sitharaman’s statement that the government is open to further tweaking the Rs 3 lakh crore credit guarantee scheme for providing collateral-free loans to small businesses. Traders may take note of report that India’s confirmed case tally is over 3.1 million now, with 22.2 per cent cases still active. Recovery rate has now risen to over 75 per cent, with over 2.4 million successfully cured. Meanwhile, the Finance Ministry said banks have sanctioned loans of about Rs 1,55,995 crore under the Rs 3-trillion Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector reeling under the slowdown caused by the coronavirus pandemic. Though, traders may be concerned as the Reserve Bank of India (RBI) in its annual report for 2019-20 said that the Country's headline inflation is expected to firm up further in the coming months largely due to disruptions in food and manufactured items' supply chains. There may be some cautiousness with rating agency ICRA’s report that the economy is expected to contract by 25 per cent each in the first quarter of FY'21 both in terms of GDP ( gross domestic product) as well GVA (gross value added). Banking stocks will be in focus with a private report that even though the unlock phases have kick started economic activities in various sectors, most banks believe that meaningful credit growth recovery is likely only after 18 months, while near-term uncertainty on asset quality remains. There will be some reaction in metal stocks with worldsteel’s report that India's crude steel output fell 24.6 percent to 7.150 million tonnes (MT) during July 2020. Agriculture industry stocks will also be in limelight as the RBI flagged concerns about impact of climate change, in terms of volatile rainfall intensity, increase in extreme events and rising temperature, having implications for India's agriculture outlook.

The US markets ended mostly higher on Tuesday ahead to Federal Reserve Chair Jerome Powell's speech to the Jackson Hole symposium on Thursday. Asian markets are trading mixed on Wednesday after major indexes on Wall Street notched new records yet again overnight. 

Back home, Indian equity benchmarks erased most of their intraday gains but somehow managed to end the session marginally in green on Tuesday, tracking positive global markets amid enthusiasm on the recovery from Covid-19. Benchmarks made positive start, as traders got encouragement with a private report that the phase 2 human clinical trial of the Oxford COVID-19 vaccine candidate by Pune-based Serum Institute of India (SII) is set to begin from Tuesday. The observer-blind, randomised controlled study to determine the safety and immunogenicity of Covishield on healthy Indian adults will begin at Bharati Vidyapeeth Medical College and Hospital in Pune. Some optimism also came as ratings agency Crisil said it expects India’s retail food inflation, measured through the Consumer Price Index (CPI), to ease in the second half of this financial year owing to the effect of high base of previous year coupled with a bumper rabi harvest and good prospect of kharif harvest. However, volatility hit the bourses in late morning trade as key indices oscillated between the positive and negative territory, as traders got anxious with a report by State Bank of India (SBI) stating that states are likely to face uncovered losses of up to Rs 3.1 lakh crore in the current financial year due to massive disruption caused by COVID-19 pandemic. Some pessimism also came with a private report stated that amid uncertain business environment and liquidity pressure arising due to the coronavirus crisis, merger and acquisition (M&A) deals will continue to see deferral or cancellation in the short term as buyers assess the impact of the lockdown. A significant number of M&A deals were either deferred or canceled between April and July, as the nationwide lockdown imposed to curb the spread of the deadly coronavirus, negatively impacted the economic activities and businesses. Finally, the BSE Sensex rose 44.80 points or 0.12% to 38,843.88, while the CNX Nifty was up by 5.80 points or 0.05% to 11,472.25.