Markets to get positive start following Asian peers

Indian markets ended higher Tuesday led by gains in banks, financial and IT stocks. Today, the markets are likely to make positive start tracking Asian peers. Some support will come as the government approved the 15th tranche of electoral bonds which will be open for sale between January 1 and January 10. Electoral bonds have been pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency in political funding. Traders may take note of report that foreign institutional investors (FIIs) net bought shares worth Rs 2,350 crore, whereas domestic institutional investors (DIIs) net sold shares worth Rs 2,020 crore in the Indian equity market on December 29, as per provisional data available on the NSE. However, there may be some cautiousness as India witnessed a slight rise in fresh Covid cases with 20,529 cases. India's caseload now stands at 10,245,326. India had reported six cases of new coronavirus variant. But the government on Tuesday said the existing vaccines for Covid-19 will protect against the new variants as there is no evidence to prove otherwise. Banking and financial stocks may remain in focus after the RBI in a report said that India’s financial sector should brace for challenging times ahead with an increased risk of deterioration in asset quality and lower demand for loans. The report said NBFCs or shadow banks may see a hit on their profitability. There will be some reaction in auto component industry stocks as ratings agency ICRA said it has revised its outlook on the auto component industry from negative to stable, on the back of demand revival across original equipment manufacturers (OEMs), replacements and exports.

The US markets ended lower on Tuesday as uncertainty about whether the US Senate would authorize additional stimulus checks gave investors a reason to take profits. Asian markets are trading mostly higher on Wednesday amid report that China and the European Union are likely to clinch a deal this week.

Back home, Indian equity benchmarks ended the day in the positive territory for the fifth straight session and settled at record closing highs on Tuesday, with major contribution from Banking, Finance and IT stocks. The benchmarks staged a gap up opening, as traders took encouragement with FICCI’s report stated that India could benefit from the likely shift in global supply chains from China to other economies in the aftermath of the COVID-19 pandemic, likely to boost sentiments in markets. Sentiments remained positive as the Finance Ministry released the ninth installment of Rs 6,000 crore to the states to meet GST compensation shortfall, taking the total amount of fund released to Rs 54,000 crore. The Centre had set up a special borrowing window in October 2020 to meet the estimated shortfall of Rs 1.10 lakh crore in revenue arising on account of implementation of GST. Market participants also took a note of Reserve Bank of India (RBI) paper stating that maintaining the inflation target at 4 percent is appropriate for India as targeting a lower rate could impart deflationary bias to the monetary policy. It said under the current dispensation, the RBI has been mandated by the government to maintain retail inflation at 4 percent with a margin of 2 percent on either side. However, domestic indices trimmed some of their gains in late morning deals, as some anxiety remained among traders with the rating agency ICRA’s report that banks' gross non-performing assets (NPAs) and net NPAs are expected to rise to 10.1-10.6 percent and 3.1-3.2 percent, respectively by March 2021 from 7.9 percent and 2.2 percent, respectively as of September 2020. But, local gauges regained traction to end higher, taking support from report of UN stating that the India's economy could prove to be the ‘most resilient’ in the subregion of South and South-West Asia over the long term, the positive but lower economic growth post COVID-19 pandemic and the country's large market will continue to attract investments. The growth, however, was mainly driven by India, which accounted for 77 percent of the total inflows and received $51 billion in 2019, up 20 percent from the previous year. Adding optimism, Union minister Nitin Gadkari said that the Micro, Small and Medium Enterprises Ministry is contemplating fresh plans and laws to find a solution of the receivables issue as outstanding dues are creating working capital problem for the sector. Finally, the BSE Sensex rose 259.33 points or 0.55% to 47,613.08, while the CNX Nifty was up by 59.40 points or 0.43% to 13,932.60.