Markets likely to get pessimistic start on Wednesday

Indian markets witnessed a sharp recovery to end 1 percent higher on Tuesday led by robust buying in IT and pharma stocks. Today, the start of session is likely to be pessimistic tracking weakness in global peers. Rising coronavirus cases to dent the sentiments in markets. With 19,174 fresh Covid-19 cases, India's caseload now stands at 10,099,303. The country's death toll has mounted to 146,476. At least 20 passengers from the UK tested positive for Covid-19 on Tuesday as the government issued a stringent set of SOPs mandating RT-PCR tests at airports for each traveller from the country and isolation in a separate unit of an institutional facility for positive cases in view of the new coronavirus strain. However, investors may get some solace from a private report that India is likely to approve Oxford/AstraZeneca’s coronavirus vaccine for emergency use by next week after its local manufacturer submitted additional data sought by authorities. Traders may be taking encouragement with PHD Chamber of Commerce and Industry’s EBM Index showing that the continuous improvement in the key economic and business indicators signals that the worst is behind us and expectations of positive GDP growth at 0.1 per cent to 2 per cent in Q3 and 2 per cent to 4 per cent in Q4 FY 2020-21 are becoming strong with a higher growth trajectory in FY 2021-22 at 7.7 per cent. Some support may come with Commerce and Industry Minister Piyush Goyal’s statement that India and Bangladesh should work with greater collaboration in the agriculture sector as it can be a game-changer for both the countries. Meanwhile, the government has again extended the suspension of fresh proceedings under the insolvency law by three more months amid the disruptions caused by the coronavirus pandemic. There will some buzz in agriculture sector stocks with report that paddy procurement has increased 22 per cent so far in the ongoing kharif marketing season to 422.01 lakh tonnes, valued at Rs 79,675 crore. NBFCs and HFCs stocks will be in focus with ICRA’s report that after witnessing a sharp contraction in the current fiscal so far, the domestic securitisation volumes of retail pools originated by non-banking financial companies (NBFC) and housing finance companies (HFC) are likely to witness a healthy bounce back in FY2022.

The US markets ended mostly lower on Tuesday over concerns the new COVID variation, which has halted movement in and out of the UK and sent vaccine makers scrambling to ensure their drugs are effective against it, could further hamper a softening economic recovery. Asian markets are trading mixed on Wednesday as the investor focus swung between concerns about a new faster-spreading variant of the coronavirus and hopes that more US fiscal aid would propel an economic recovery.

Back home, Indian equity benchmarks made smart recovery on Tuesday, after witnessing massacre in the previous session, led by gains in information technology heavyweights like HCL Technologies, Tech Mahindra and Infosys. Soon after making a positive start, key gauges entered into red terrain as traders turned pessimistic amid reports of new strains of coronavirus in the UK. Rising corona virus cases too dampened sentiments with increase in Covid-19 cases, India's caseload now stands at 10,075,422 and the country's death toll has mounted to 146,145. Cautiousness also crept in on report that Maharashtra government imposed a curfew from 11 pm to 6 am in all municipal corporations from December 22 till January 5, 2021. Markets took U-turn in second half of the trade to end near intraday highs, as traders opted to buy beaten down but fundamentally strong stocks. Traders took encouragement with CRISIL’s report that corporate profits rose 15 per cent to touch an all-time high in the September quarter as margins widened on softer input costs and better utilistaion levels. Some support also came as economic think-tank NCAER, in its mid-year review of the Indian economy, has said that India's Gross Domestic Product (GDP) growth is likely to turn positive at 0.1 per cent in the October-December (Q3) quarter, after witnessing a contraction in the first half of the current financial year. It also forecast 2 per cent growth in the fourth quarter (January-March 2021). It noted that the overall contraction in the current fiscal is likely to be contained at 7.3 per cent. Adding to the optimism, Ministry of Finance has released the 8th weekly installment of Rs 6,000 crore to the states. Out of this, an amount of Rs 5,516.60 crore has been released to 23 states and an amount of Rs 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council. Finally, the BSE Sensex rose 452.73 points or 0.99% to 46,006.69, while the CNX Nifty was up by 137.90 points or 1.03% to 13,466.30.