Domestic indices trade higher with marginal gain in early deals

Indian equity benchmarks extended their precious session’s gains with optimistic start on Tuesday. But, soon markets trimmed most of their gains and are trading above water in early deals. Buying in IT, Auto and TECK counter supporting the domestic indices whereas selling in Telecom, Utilities and Bankex were dragging the markets down. Traders took some encouragement as the Reserve Bank has decided to extend by six months the enhanced borrowing facility provided to banks to meet liquidity shortage till March 31, 2021, amid the ongoing economic woes created by the coronavirus pandemic. However, some cautiousness came in as ratings agency ICRA revised its forecast for the contraction in India's FY21 GDP to 11 per cent from its earlier assessment of 9.5 per cent. The ratings agency cited the elevated levels of Covid-19 infections at the end of Q2FY21.

On the global front, most of the Asian markets are trading higher following the overnight rally in US as well as European markets and on optimism about a new US coronavirus relief bill after House Speaker Nancy Pelosi said a new package is still possible. Nevertheless, investors remained cautious ahead of the first US presidential debate set to take place later today.

Back home, defence stocks were in focus after the government unveiled a new Defence Acquisition Procedure with a focus on significantly boosting indigenous production. Under the new policy, the offset guidelines have also been revised facilitating preference to defence majors offering to manufacture products in India over relevant components. In scrip specific development, IIFL Finance rose half a percent despite Moody's Investors Service downgrading its corporate family rating (CFR) by a notch to B2 from B1.

The BSE Sensex is currently trading at 38088.15, up by 106.52 points or 0.28% after trading in a range of 37999.99 and 38235.94. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.27%, while Small cap index was up by 0.11%.

The top gaining sectoral indices on the BSE were IT up by 1.19%, Auto up by 0.83%, TECK up by 0.79%, Metal up by 0.78%, Consumer Durables up by 0.71%, while Telecom down by 1.36%, Utilities down by 0.57%, Bankex down by 0.55%, PSU down by 0.53%, Oil & Gas down by 0.18% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.62%, Asian Paints up by 1.66%, Titan Co up by 1.40%, Ultratech Cement up by 1.05% and Infosys up by 0.92%. On the flip side, Indusind Bank down by 2.56%, ONGC down by 1.81%, ICICI Bank down by 1.39%, Power Grid down by 1.34% and Bharti Airtel down by 1.16% were the top losers.

Meanwhile, domestic rating agency ICRA has further revised down its Gross Domestic Product (GDP) estimate for the country and now expects the Indian economy to contract by 11 percent in FY21. The agency, which was earlier estimating a contraction of 9.5 percent, said the revision has been done as the rate of new COVID-19 infections remains elevated. It can be noted that some analysts have pegged the economy to contract by up to 14 percent after the release of the official GDP data for Q1FY21 which showed a 23.9 percent decline. The RBI is yet to give its estimate on the GDP and has been maintaining that it will be contracting.

The rating agency has stated that if the number for Q1FY21 gets revised down after data for the small businesses and less formal sectors becomes available, the overall GDP outcome for FY21 could be even worse than estimated by the 11 percent contraction. For the ongoing second quarter, it is maintaining its earlier estimate of a contraction of 12.4 percent. Besides, it has revised its projections for Q3FY21 and Q4FY21 and now expects contractions of 5.4 percent and 2.5 percent, respectively, in the two quarters which will imply a full year contraction of 11 percent.

As per the report, construction, trade, transport, hotels, communications and services related to broadcasting will recover with the longest lag and continue to underperform the rest of the economy. Activity in some sectors, especially those like travel, tourism and recreation, where social distancing is difficult, will depress economic activity. Additionally, it said the continued economic uncertainty and health concerns would result in a prolonged impact on consumption and investment decisions. It added that the revenue shock being experienced by the Central and the state governments would limit the extent of fiscal support that may be forthcoming and result in protracted fears about deferral of both the capex and the release of timely payments.

The CNX Nifty is currently trading at 11270.70, up by 43.15 points or 0.38% after trading in a range of 11235.90 and 11305.40. There were 29 stocks advancing against 21 stocks declining on the index.

The top gainers on Nifty were TCS up by 2.83%, Hindalco up by 2.71%, Hero MotoCorp up by 2.59%, Asian Paints up by 1.88% and Shree Cement up by 1.76%. On the flip side, Indusind Bank down by 2.28%, ONGC down by 1.95%, Bharti Airtel down by 1.44%, Power Grid down by 1.43% and ICICI Bank down by 1.20% were the top losers.

Asian markets were trading mostly in green; Nikkei 225 inched up 1.45 points or 0.01% to 23,513.07, Straits Times rose 17.42 points or 0.70% to 2,500.43, KOSPI jumped 18.64 points or 0.81% to 2,326.72, Jakarta Composite gained 21.58 points or 0.44% to 4,928.13 and Shanghai Composite was up by 16.86 points or 0.52% to 3,234.39. On other hand, Hang Seng slipped 57.82 points or 0.25% to 23,418.23 and Taiwan Weighted declined 26.91 points or 0.22% to 12,435.85.