Markets likely to get optimistic start of new week; IIP, CPI data eyed

Indian markets ended higher on Friday led by gains in financials after the Reserve Bank of India (RBI) kept interest rates unchanged at 4 percent in the face of high inflation, while also retaining its accommodative stance. Today, the start of new week is likely to be optimistic, extending their rally, on the back of firm global cues.  Investors will be eyeing the industrial production data for August and CPI inflation for September to be released later in the day. Some support will come in with report that foreign portfolio investors (FPI) have invested Rs 1,086 crore on a net basis so far in October in Indian markets, tracking encouraging factors including improved GST collection, acceleration in economic activity and positive global cues. Traders may take note of report that India will press for early and complete disengagement of troops by China from all the friction points in eastern Ladakh at the seventh round of high-level military talks between the two countries to be held today. Meanwhile, the GST Council in its meeting on October 12 is likely to discuss the suggestion of non-BJP ruled states of setting up a ministerial panel to develop consensus on the issue of compensation. Moreover, India on Sunday registered 67,757 new Covid-19 cases, taking the tally to 7,119,300 and the death toll reached 109,184. There will be some buzz in the agriculture stocks as agriculture-commodities exports rose by 43.4 per cent to Rs 53,626.6 crore in the first half of the current fiscal notwithstanding the ongoing COVID-19 crisis. There will be some reaction in power stocks with report that power producers' total dues owed by distribution firms rose over 37 per cent year-on-year to Rs 1.33 lakh crore in August 2020, reflecting stress in the sector.  Financials could be in focus ahead of the Supreme Court hearing on loan moratorium issue. The Reserve Bank of India has filed an affidavit before the apex court saying that a loan moratorium exceeding six months could impact credit behavior of borrowers and increase the risks of delinquencies post resumption of scheduled payments. There will be some important earnings announcements, like Wipro, to keep the markets buzzing. Besides, Mazagon Dock and UTI Asset Management Company’s shares will today make their stock market debut, after a stellar performance during the subscription phase of the IPO.

The US markets ended higher on Friday after President Donald Trump suggested he was once again in favor of a broad relief package. Asian markets are trading mostly in green on Monday on renewed hopes for US stimulus.

Back home, Indian equity benchmarks extended gains to a seventh straight session on Friday, led by buying in Banking, Finance, Capital Goods and Oil & Gas stocks. After making optimistic start, domestic indices lost their ground and traded with minor losses, as traders turned anxious with former Reserve Bank Governor C Rangarajan’s statement that the combined fiscal deficit of states and the centre is likely to go up to 14 per cent during the current year (FY21) against the mandated level of 6 per cent. He also said banks should neither be timid nor adventurous while lending as the loans of today should not become NPAs of tomorrow. However, markets soon bounced back into positive territory in morning deals, as market participants cheered the RBI's monetary policy. The RBI decided to keep the benchmark interest rate unchanged at 4 percent but maintained an accommodative stance, implying more rate cuts in the future if the need arises to support the economy hit by the COVID-19 crisis. Local indices gained more strength in afternoon deals, with Assocham’s statement that India's economy has shown a remarkable resilience in the last few months, braving the impact of the coronavirus pandemic with lead indicators such as manufacturing PMI and exports returning to growth trajectory. Some support also came with the Finance Ministry’s statement that banks have sanctioned loans of about Rs 1,87,579 crore to 50.7 lakh business units under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector impacted by slowdown caused by the coronavirus pandemic. Besides, RBI Governor Shaktikanta Das’ comments on expectation of GDP turning positive in the January-March quarter of the current financial year fuelled the market rally. Finally, the BSE Sensex rose 326.82 points or 0.81% to 40,509.49, while the CNX Nifty was up by 79.60 points or 0.67% to 11,914.20.