Domestic markets likely to make pessimistic start

Indian markets ended notably higher on Thursday, with investors picking up shares from across various sectors, thanks to positive cues from Wall Street. Today, the start of session is likely to be pessimistic amid weakness in global markets. Investors will be eyeing the July industrial and manufacturing production data, which is scheduled to release later in the day. Traders will be concerned with ratings agency Crisil’s report that the Indian economy will contract by 9 per cent in 2020-21 as the coronavirus infections are yet to peak and the government is not providing adequate direct fiscal support. Also, a private report stated that India's central bank could succeed in inflation targeting by reaching the 4 per cent target over a particular business cycle rather than for a particular date such as two year ahead. Rising coronavirus cases coupled with India and China tensions may weight on market sentiments. With a highest single-day spike of 96,760 coronavirus cases, India's tally has surged past the 4.5-million mark to 4,559,725. India and China have agreed on a five-point plan for resolving the prolonged border face-off in eastern Ladakh. There will some cautiousness with Care ratings report that reflecting the overall stress in the economy, the employment growth rate declined to 3.5 per cent in FY20 from 3.8 per cent in the previous fiscal year, but the total number of jobs increased to 50.02 lakh from 48.32 lakh, says a report. In FY20, 1.70 lakh new jobs were added, while the net addition was 1.76 lakh in FY19. However, some support may come later in the day with Commerce and Industry Minister Piyush Goyal’s statement that government given America a very good, very balanced offer for the agreement and indicated that the India-US limited trade deal is likely to be signed after elections. Traders may take note of the IMF’s statement that there is a need for another stimulus, especially expenditures on health, food and income support for vulnerable households, and support for businesses in view of the Covid-19 pandemic. Meanwhile, India has fallen 26 spots to the 105th position on the Global Economic Freedom Index 2020, while the country was at the 79th spot in last year’s rankings.

The US markets closed in red on Thursday as heavyweight tech-related stocks resumed their decline following a sharp rebound the previous session. Asian markets are trading mostly lower on Friday amid growing concerns about another round of negotiations on the UK’s departure from the European Union.

Back home, snapping two-day losing run, Indian equity benchmarks rebounded sharply to touch near intraday day’s high point on Thursday, supported by healthy buying in Reliance Industries, Asian Paints and Axis Bank. Key indices opened on a strong note and sustained buying momentum throughout the session, as traders took encouragement with Finance Minister Nirmala Sitharaman’s statement that banks are going to be the catalysts for economic revival. Some support also came in with report that the government is planning to save about Rs 35,000 crore to help manage the fiscal load put by the production-linked incentive (PLI) and phased manufacturing program (PMP) schemes, its initiatives to attract investment into the country. Traders took note of report that Niti Aayog CEO Amitabh Kant said India was the youngest country with a vibrant startup eco-system and it must convert the present (COVID-19) crisis into an opportunity. Domestic indices gained more strength during final hour of session, taking support form report that India's exports during the first week of September jumped 13.35 per cent year-on-year to 6.12 billion dollars. At the same time, imports declined by 21.37 per cent to 6.85 billion dollars. Consequently, the deficit during September 1 to 7 worked out to 730 million dollars. Traders paid no heed towards ICRA’s report that not paying the full Goods and Services Tax (GST) compensations by the Centre is among the factors which may result in up to Rs 3 lakh crore cut in capital expenditure (capex) by the states in FY21. It noted that the borrowing alternative offered by the Centre to make up for the shortfall in the promised compensation will lead to the states' fiscal deficits widening to 4.25-5.52 percent. Finally, the BSE Sensex rose 646.40 points or 1.69% to 38,840.32, while the CNX Nifty was up by 171.25 points or 1.52% to 11,449.25.