Markets likely to get positive start ahead of RBI policy outcome

Indian markets closed flat on Thursday led by a decline in IT stocks and heavyweight HDFC Bank after the RBI advised the lender to temporarily halt launches of Digital 2.0 programme. Today, the markets are likely to make positive start ahead of the Reserve Bank of India's bi-monthly monetary policy to be announced later in the day. The Monetary Policy Committee (MPC) of the Reserve Bank is expected to hold fire as persistent high inflation and a lower-than-expected contraction of the economy leave no headroom for a rate cut. Sentiments will get boost with the International Monetary Fund’s statement that India's economy, severely affected by the coronavirus pandemic, is gradually recovering. It said India's economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 percent and held out hopes for further improvement on better consumer demand. Some support will come with Finance Minister Nirmala Sitharaman’s statement that India’s economy will return to growth in 2021-22 and higher spending in the budget due in February will lay the foundations for even stronger growth in the next four to five years. Meanwhile, the Finance Ministry has relaxed the expenditure caps for a number of ministries and departments, a move which should add power to the economy’s wheels by way of extra government spending. Though, there may be some cautiousness as on Thursday, India reported 31,094 fresh Covid-19 cases. Its case tally now stands at 9,564,565. The country's death toll has mounted to 139,102. Aviation stocks will be in focus with Civil Aviation Minister Hardeep Singh Puri’s statement that the cap on the number of domestic flights that Indian airlines are permitted to operate was increased from 70 per cent to 80 per cent of their pre-COVID levels. There will be some reaction in insurance industry stocks as the insurance regulator clarified that it has given permission to change health insurance premiums only by 5 percent. Telecom stocks will be in limelight after Trai announced the latest subscription figures. Bharti Airtel was the biggest gainer in terms of users in September with 3.8 million subscriber additions, Reliance Jio added 1.5 million users while Vodafone Idea continued losing subscribers.

The US markets ended mixed on Thursday after a report that Pfizer Inc had slashed the target for the rollout of its COVID-19 vaccine. Asian markets are trading mixed on Friday after a report said Pfizer expects to ship half the Covid-19 vaccine doses it originally planned for this year due to supply chain issues.

Back home, Indian equity benchmarks ended the Thursday’s trade marginally in green, as traders remained on sidelines ahead of outcome of Reserve Bank of India’s (RBI) December Policy Meet. Markets started the day on optimistic note as traders took encouragement with Niti Aayog Vice Chairman Rajiv Kumar’s statement that the Indian economy is coming out of the pandemic-induced degrowth and GDP growth will enter the positive territory in the fourth quarter of this fiscal. Some support also came with ICRA Ratings’ latest report where it said that the Indian corporate sector, which gradually returned to normalcy from the second quarter of the current fiscal, is likely to sustain improvement in the third quarter, aided by strong festive demand. Some support also came with Moody's Investors Service’s statement that conditions will improve for Indian corporates next year as economic activity picks up steam post-lockdown and earnings grow on the back of widespread demand revival across sectors. It added that most companies' earnings will grow as demand starts to recover following a sharp slump, and financially strong companies will maintain good access to funding, but speculative-grade issuers will face challenges. Market participants started paring gains and continued booking profits till end of the day which led markets to end near neutral lines, as traders turned cautious after the growth of India’s service sector slowed in the month of November, although it remained well above the 50-level that separates growth from contraction, with a further upturn in new work supporting business activity growth and the first rise in employment for nine months. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index fell to 53.7 in November from 54.1 in October. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services - eased to 56.3 in November from 58.0 in October. Finally, the BSE Sensex slipped 14.61 points or 0.03% to 44,632.65, however the CNX Nifty was up by 20.15 points or 0.15% to 13,133.90.