Benchmarks to make cautious start amid mixed global cues

Indian markets ended lower on Thursday, dragged down by banking stocks and index heavyweights TCS and RIL, as China tensions remained in focus. Today, the markets are likely to make cautious start following mixed global cues. There will be some cautiousness with report that advance tax collections fell 25.5 per cent to Rs 1,59,057 crore in the second quarter of the fiscal, However, there was improvement over the first quarter ended June, when advance tax revenue had plunged 76 per cent to a tepid Rs 11,714 crore as the whole economy was under a stringent lockdown. Rising coronavirus cases are likely to dampen sentiments in the markets. India has recorded 96,730 Covid-19 cases in just 24 hours, taking its tally past the 5.2-million mark. With this, India is rapidly nearing the US tally of 6.8 million. However, traders may get some encouragement with report that the Reserve Bank of India (RBI) will purchase government securities under open market operations (OMOs) for an aggregate amount of Rs 10,000 crore on September 24, 2020. Some support may also come as investment through participatory notes (P-notes) in the domestic capital market surged to over Rs 74,000 crore till August-end, making it the highest level in 10 months. Meanwhile, the commerce ministry's investigation arm DGTR (Directorate General of Trade Remedies) has initiated a probe into an alleged circumvention of the anti-dumping duty imposed on the imports of axle for trailers from China. Banking stocks will be in focus with domestic ratings agency -- ICRA’s report that divesting majority stake in state-run lenders by the government will be credit negative for such public sector banks (PSBs). Many of the entities where the government is mulling selling off majority stake as per reports have a weak credit profile. There will be some reaction in defence stocks as the government permitted foreign direct investment (FDI) of up to 74 per cent under automatic route in the defence sector with a view to attracting overseas investors. There will be some reaction in insurance sector as regulator Irdai is mulling over a plan to allow the tenure extension of COVID-19 specific insurance products as the vaccine for the disease is seemingly away by some more time.

The US markets declined on Thursday after data showed high levels of weekly jobless claims, while technology-related stocks resumed their slide. Asian markets are trading mostly higher on Friday as investors look for the next catalyst to reignite the rally.

Back home, snapping a two-day rising streak, Indian equity benchmarks ended with losses of more than half percent each on Thursday, as border tensions with China and a negative trend in global peers, following US Fed's caution on economic recovery, dented investor appetite. The benchmarks staged a gap down opening as the Organisation for Economic Co-operation and Development (OECD) in its Interim Economic Outlook report forecast a deeper contraction of 10.2% for India in the current fiscal, surpassing its June estimate of -7.3% in the event of a second wave of infections. Traders remain concerned with a report stated that total tax collection of the Centre, including advance tax collection for the second quarter, fell 22.5% to Rs 2,53,532.3 crore till September 15 of the current fiscal as compared to the year-ago period. Key gauges continued to show a sluggish trend in afternoon session, with private report stated that India’s GDP is likely to contract by 8.6 percent in FY21 as against its earlier prediction of 5.8 percent, citing factors including the modest government response to the crisis for its estimate. Market participants overlooked Commerce and Industry Minister Piyush Goyal’s statement that the government is in the process of bringing out a strategy paper on boosting industrial growth which will be a road map for all businesses in the country. He said the government is in the process of rationalising the existing central labour laws into four labour codes -- on wages; industrial relations; occupational safety, health and working conditions; and social security by simplifying, amalgamating and rationalising the relevant provisions of the existing central labour laws. Finally, the BSE Sensex fell 323.00 points or 0.82% to 38,979.85, while the CNX Nifty was down by 88.45 points or 0.76% to 11,516.10.