Markets likely to get negative start on Tuesday

Indian markets ended over a percent higher on Monday, boosted mainly by bank and FMCG stock. Today, the markets are likely to get negative start following sell-off in the global peers. There will be some cautiousness with Finance Minister Nirmala Sitharaman’s statement that the government has begun an exercise to assess the impact of the pandemic on the economy and likely contraction in GDP, even as she did not rule out the possibility of another stimulus to boost growth. Though, some respite may come later in the day with a private report that COVID-19 vaccines will be the fastest vaccine to be ever developed and they will be available by the summer of 2021. Some support will come with data released by the Ministry of Statistics and Programme Implementation (MoSPI) in the quarterly bulletin of the Periodic Labour Force Survey (PLFS) showing that unemployment in urban areas fell to 8.4% in July- September 2019 from 8.9% in the June quarter last year. Market participants may take encouragement with report that India on Monday witnessed a significant drop in the number of new Covid-19 cases. According to Worldometer, at 46,498, the country registered fewer daily infections than the US -- for the first time in over a month -- taking its tally to 7,594,736. Traders may take note of report that Finance Minister Nirmala Sitharaman exhorted large central public sector enterprises (CPSEs) to achieve by December 75 per cent of their planned capital expenditure (capex) target for 2020-21, to support economic growth hit by the COVID-19 crisis. There will be some reaction in sugar industry stocks with ISMA’s statement that India needs to export 6 million tonnes (MT) of sugar in 2020/21 marketing year started on October 1 as the production is set to jump on higher area. Meanwhile, the Rs 518-crore Equitas Small Finance Bank initial public offer (IPO) will open for subscription on today, October 20, 2020. The company has fixed a price band of Rs 32-33 per share and the issue will close for subscription on October 22. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets settled lower on Monday as the deadline for US lawmakers to pass an economic stimulus bill approached. Asian markets are trading in red on Tuesday as investors await the October fixing of China’s benchmark lending rate.

Back home, in a highly volatile day, Indian equity benchmarks ended higher for second day in row on Monday, on the back of a broad-based buying interest led by gains in banking, financial services, Oil & Gas and Metal shares. Positive global cues also boosted investor sentiment. Markets made an optimistic start and stayed in green for whole day, as traders got respite with Finance Minister Nirmala Sitharaman’s statement that the government has taken a host of initiatives, including a stimulus package totalling 10 percent of the country's GDP and major reforms in the labour sector, to contain the spread of coronavirus disease (covid-19) pandemic and also to mitigate its social and economic impact. Some support also came with ICRA Ratings’ report that farm sentiments have remained buoyant mainly driven by healthy monsoon and further optimism of a good kharif crop. It also said agriculture income is likely to benefit over the medium term aided by increased government focus on rural income coupled with the recently introduced farm reforms. However, in afternoon deals, key gauges erased most of their initial gains, as traders got anxious with report that after six months of severe stress triggered by the toughest lockdown so far, some high-frequency indicators point towards economic recovery but there are signs that this revival is fragile. It estimated that the economy is likely to contract by 13.5 per cent in the second quarter (July-September), and the contraction in FY21 (April 2020 to March 2021) is likely to be around 9.5 per cent unless the government takes immediate initiative to revive the economy. But, markets regained upward momentum in late afternoon deals and settled with decent gains, as optimism remained among traders with the government stating that central public sector enterprises have cleared payments to the tune of Rs 13,400 crore owed to micro, small and medium enterprises in the last five months and Rs 3,700 crore was paid to the units in September alone. The micro, small and medium enterprises (MSME) Ministry this month has written to the top management of over 2,800 corporates by name to make payment of pending dues of MSMEs. Finally, the BSE Sensex surged 448.62 points or 1.12% to 40,431.60, while the CNX Nifty was up by 110.60 points or 0.94% to 11,873.05.