Markets to get pessimistic start amid weak global cues

Indian markets ended Wednesday's volatile session on a higher note led by gains in metals, realty and financial stocks amid positive global cues. Today, the start of session is likely to be pessimistic on weakness in global markets. Traders will be concerned as the International Monetary Fund slashed this year's economic forecast for Asia, reflecting a sharper-than-expected contraction in countries like India, a sign the coronavirus pandemic continues to take a heavy toll on the region. There will be some cautiousness with a private report that the government expects the fiscal deficit to be close to 7 percent of GDP or thereabouts in the current financial year. The general deficit is unlikely to be lower than 11 percent, with the state government borrowings estimated at 4 percent levels. Meanwhile, India on Wednesday recorded over 56,000 cases, taking the tally to 7,705,158. Death toll rose to 116,653. However, some respite may come later in the day as Reserve Bank Governor Shaktikanta Das said the country is at the doorstep of economic revival on the back of accommodative monetary and fiscal policies being pursued by the central bank and the government. Some support may come as the Reserve Bank announced an on tap Targeted Long-Term Repo Operations (TLTRO) scheme of up to Rs 1 lakh crore to enable banks to provide liquidity support to a host of sectors, including agriculture, retail, drugs and pharmaceuticals and MSMEs. Market participants may take note of Economic Affairs Secretary Tarun Bajaj’s statement that the government is open to further stimulus measures to boost the coronavirus-hit economy. Agriculture industry stocks will be in focus as Government-owned FCI and state procurement agencies have bought 106.88 lakh tonnes of paddy so far in the kharif marketing season for Rs 20,180 crore. There will be some reaction in Rubber industry stocks as the commerce ministry recommended for continuation of anti-dumping duty on a Chinese synthetic rubber for five more years with a view to guard domestic players from cheap imports.

The US markets closed lower on Wednesday after a volatile trading session, as investors worried whether difficult negotiations in Washington would produce a deal for a fresh U.S. coronavirus stimulus package. Asian markets are trading in red on Thursday after a bumpy overnight session on Wall Street amid fears that agreement on a key U.S. stimulus bill will not be reached until after the presidential election on November 3.

Back home, Indian equity benchmarks managed to close higher after witnessing wild swings during the session on Wednesday, owing to buying interest in Realty, Telecom and Metal shares. The benchmarks staged a gap up opening, as traders took encouragement with the Commerce and Industry Ministry’s statement that foreign direct investment (FDI) in India has increased by 16 per cent year-on-year to $27.1 billion during April-August this year. During April-August last year, India had received FDI worth $23.35 billion. Additional support came with Ratings agency ICRA’s report that India's economic recovery has ‘broadened and strengthened’ in September 2020 from the pandemic-induced lows seen in April 2020. It said that as many as nine of the tracked 15 non-financial high frequency indicators recorded growth in September 2020, while five posted a narrower year-on-year (YoY) contraction in that month. However, domestic bourses wiped out entire gains in late afternoon deals, as RBI analysis showing that aggregate sales of private sector manufacturing companies recorded a sharp contraction of 41.1 per cent year-on-year in the first quarter of 2020-21, reflecting the impact of the pandemic induced lockdown. Some concern also came with reports that even as brands are betting big on Diwali to light up their sales, a survey has shown below-average spending propensity among urban Indians this festive season with nearly 50 per cent respondents agreeing of being careful about their finances. But, the benchmarks managed to bounce from intraday lows in the last 30 minutes of trade, taking support from the Retirement fund body, Employees' Provident Fund Organisation (EPFO) in its latest ‘Provisional Estimate of Net Payroll’ data report has showed that India created 1005852 new jobs in the month of August 2020 as against revised figure of 748784 in July 2020. Finally, the BSE Sensex rose 162.94 points or 0.40% to 40,707.31, while the CNX Nifty was up by 40.85 points or 0.34% to 11,937.65.