Markets likely to open in red on Wednesday

Indian markets ended higher with gins of over half a per cent each on Tuesday, led by buying in financial counters. Today, the markets are likely to make pessimistic start. There will be some cautiousness with the government data showing that contracting for the sixth straight month, India's exports slipped 12.66% to $22.7 billion in August, on account of decline in the shipments of petroleum, leather, engineering goods and gems and jewellery items. The trade deficit for August this year was estimated at $6.77 billion, against $4.8 billion in July 2020 and $13.86 billion in August 2019. Also, rising coronavirus cases may dampen sentiments in the markets. India has crossed the grim 5-million mark by recording over 82,376 cases in the last 24 hours. With this, India is rapidly nearing the US tally of 6.7 million. The death toll has risen by 1,283 to 82,091. Though, some respite may come later in the day as Chief Economic Advisor Krishnamurthy Subramanian exuded confidence that the country would be back to a high growth path through reforms announced by the government, after overcoming the COVID-19 pandemic. Some support may come with a private report that consumer confidence index has shown a marginal uptick of 1.1 percentage points in September 2020. Traders may take note of Foreign Secretary Harsh Vardhan Shringla’s statement that India has received over $20 billion in FDI amid the coronavirus pandemic, showcasing the country as one of the most attractive destinations for investment globally. Meanwhile, the Reserve Bank of India (RBI) proposed to introduce exchange-traded and over the counter (OTC) interest rate derivatives products that would be accessible to both foreign investors and retail participants. There will be some reaction in sugar stocks with report that sugar mills owed nearly Rs 13,000 crore to cane farmers as on September 11 for the crop procured during 2019-20 marketing season that started October last year.

The US markets ended higher on Tuesday as investors hoped the Federal Reserve would stick with its supportive policy stance as the central bank's two-day meeting got underway. Asian markets are trading in green on Wednesday as investors awaited a Federal Reserve meeting to gauge the extent of central bank support for the economic recovery.

Back home, Indian equity benchmarks traded in green throughout the session and ended over half a percent higher on Tuesday, as positive cues from global markets and hopes of an early vaccine kept the mood sanguine. Markets opened on strong note as the government data showed the country’s annual retail inflation eased slightly in August, against expectations. India's retail inflation in August of 6.69 percent was lower than the 6.73 percent recorded in July, but it remained above the upper end of the Reserve Bank of India's (RBI) medium-term target for the fifth straight month. However, markets soon trimmed most of gains in late morning session, as traders turned wary with S&P Global Ratings stating that India’s Gross Domestic Product (GDP) is likely to contract by 9 percent in the current financial year (FY21).  Earlier, it had a projection of 5 percent de-growth in GDP for FY21. It said that rising coronavirus disease (COVID-19) cases in the country will keep private spending and investment lower for longer. For 2021-22 fiscal, it expects economic growth at 10 percent. Though, benchmark indices regained traction in afternoon session, taking support from Minister of State for Finance Anurag Singh Thakur’s statement that the lowering of corporate tax rate has made India a globally competitive and favoured destination for investment and the impact of this landmark reform will be felt in the coming years. The government last year slashed the base corporation tax rate to 22 percent from 30 per cent, leading to revenue implication of Rs 1.45 lakh crore. Market participants took note of SBI’s report that the country needs to adopt an activist fiscal policy rather than depending on the monetary accommodation alone for turning the economic fortunes. Meanwhile, the government has introduced a bill in the Lok Sabha to amend the Banking Regulation Act to bring cooperative banks under the supervision of the Reserve Bank of India (RBI) in order to protect the interests of depositors. Finally, the BSE Sensex rose 287.72 points or 0.74% to 39,044.35, while the CNX Nifty was up by 81.75 points or 0.71% to 11,521.80.