Benchmarks to make negative start; WPI data eyed

Indian markets pared gains and ended flat with positive bias on Tuesday as losses in banks, financials and pharma sectors were capped by gains in IT stocks and heavyweight Reliance Industries. Today, the markets are likely to make negative start amid weak global cues and ahead of the WPI inflation data for September to be announced later in the day. Market participants will be eyeing the Supreme Court hearing today on a batch of petitions seeking a waiver of interest on loans during the moratorium period and seeking an extension of the moratorium. There will be some cautiousness as the International Monetary Fund (IMF) projected the Indian economy to contract by 10.3% this year, owing to the coronavirus pandemic. However, the IMF also said that India is likely to bounce back with an impressive 8.8% growth in 2021. The 8.8% growth rate would make India as the fastest growing emerging economy in the world. Traders will also be concerned with report that a day after recording its lowest single-day addition to Covid tally since August 18, India on Tuesday registered a spike of 63,517 cases, taking the total count to 7,237,082, and the death toll reached 110,617. Though some respite may come later in the day with Agriculture and Food Processing Minister Narendra Singh Tomar’s statement that the government is focusing on growth of the food processing sector as it has potential to boost farmers' income. Some support may come with report that a day after the goods and services tax (GST) Council meeting ended in a deadlock, the Centre has allowed 20 states to borrow an additional Rs 68,825 crore through the market to make up for the compensation shortfall amid inadequate cess collection. Banking stocks will be in focus as CARE Rating said Indian banks are likely to restructure around 4-5 percent of the overall bank credit outstanding while the Gross NPA (non-performing assets) ratio is likely to be 11-11.5 percent by end of FY21. There will be some reaction in PSU stocks with Finance Ministry’s statement that the Union Cabinet will soon consider new public sector enterprises policy that will define strategic sectors, which will not have more than four PSUs. There will be some important result announcements to keep the markets in action.

The US markets ended in red on Tuesday with halted Covid-19 vaccine trials and an elusive US stimulus agreement. Asian markets are trading mostly lower on Wednesday as investors await a speech from Chinese President Xi Jinping.

Back home, Indian equity benchmarks ended flat with positive bias on Tuesday. After making cautious start, key gauges gained some strength and managed to keep their head above water in first half of trading session, as Finance Minister Nirmala Sitharaman announced a Rs 73,000 crore package, including advance payment of a part of wages to central government employees and cash in lieu of LTC, to stimulate consumer demand and investment in the economy damaged by the coronavirus pandemic. Some support also came as the RBI raised banks' maximum aggregate retail exposure limit to entities with turnover up to Rs 50 crore to Rs 7.5 crore, up from Rs 5 crore, in a bid to increase credit flow to small businesses. Market participants also took a note of the Federation of Indian Chambers of Commerce and Industry (FICCI) -- President Sangita Reddy’s statement that there is a need for convergence between self-reliance and globalisation, while sustainability and diversity would remain as cornerstones of future growth. She said the Indian industry would achieve faster growth and development under. However, key gauges wiped out gains and turned highly volatile in second half of trading session, as traders reacted to muted domestic macro-economic data. Amid continuing rise in food prices, the inflation based on the Consumer Price Index (CPI) jumped to an eight-month high of 7.34 per cent in September. The retail inflation had stood at 6.69 percent in August, while it was 3.99 per cent in September last year. Besides, with lower output of manufacturing, mining and power generation sectors, industrial production, measured on the basis of Index of Industrial Production (IIP), declined by 8 percent in August. The IIP had contracted by 1.4 percent in August 2019. Some concern also came as the stalemate over compensating states for the shortfall in Goods and Services Tax (GST) collections continued with a meeting of the GST Council ending without reaching any consensus. The panel, which is the highest decision-making body on indirect taxes, for the second time in a week failed to reach a consensus on the Centre's proposal of states borrowing against future GST collections to make up for the shortfall. Finally, the BSE Sensex rose 31.71 points or 0.08% to 40,625.51, while the CNX Nifty was up by 3.55 points or 0.03% to 11,934.50.