Markets likely to get optimistic start on Monday

Indian markets ended higher on Friday led by gains in PSU banks and auto stocks. Today, the start of session is likely to be optimistic tracking positive Asian cues and hopes of vaccine. Investors will be eyeing the Markit Manufacturing PMI for December scheduled to be released later today and Markit Services PMI that would be out on January 6. Traders will be getting encouragement after the Drugs Controller General of India (DCGI) granted restricted emergency use authorization for the Serum Institute of India (SII)’s Covishield and Bharat Biotech’s Covaxin vaccines against COVID-19. Also, Union Minister of State for Health and Family Welfare Ashwini Kumar Choubey stated that India will become corona-free. Some support will come with government data showing that signalling an economic revival, goods and services tax (GST) collection touched a record high in December, posting growth of 11.6 per cent year-on-year (Y-o-Y) and surpassing the Rs 1-trillion mark for the third straight month. However, market participants may be concerned with 16,660 fresh Covid-19 cases, India's caseload now stands at 10,341,291. The country's death toll is nearing 150,000. There may be some cautiousness with the commerce ministry’s data showing that the country’s exports declined marginally by 0.8 percent to $26.89 billion in December 2020, compeered to  $27.11 billion December 2019 due to contraction in sectors like petroleum, leather and marine products. The trade deficit in December widened to $15.71 billion, as imports grew by 7.6 percent to $42.6 billion. Banking stocks will be in focus as the data released by the Reserve Bank of India (RBI) showed that banks continued to depend on personal loans for credit growth in the September quarter (July-September, or Q2).?While bank credit grew only 5.4 per cent in Q2 on a year-on-year (Y-o-Y) basis, personal loans, accounting for one fourth of the credit, continued to maintain double-digit growth. There will be some reaction in IT stocks as US President Donald Trump extended the freeze on the most sought-after H-1B visas by Indian IT professionals, along with other types of foreign work visas and green cards through March 31 to protect American workers, saying that the reasons for which he had imposed such restrictions amidst the pandemic have not changed. Power stocks will be in limelight as power producers' total dues owed by the distribution firms rose over 35 per cent to Rs 1,41,621 crore in November 2020, reflecting stress in the sector.

The US markets remained closed on Friday on account of New Year holiday. Asian markets are trading mostly in green on Monday as reports of a possible tightening in coronavirus emergency rules for Tokyo pulled Japanese stocks off 30-year highs, while also lifting the safe-haven yen.

Back home, Indian equity benchmarks ended the first trading session of 2021 with gains amid buying in telecom, industrials, capital goods and TECK stocks. The benchmarks staged a gap up opening, as traders took some support with NITI Aayog Vice-Chairman Rajiv Kumar stating that India’s economy will grow at 10 per cent in real terms and by the end of next year it will reach pre-COVID-19 level. Talking about the farmers' protest against the three agriculture laws, the NITI Aayog Vice Chairman said the government is trying its best to get their understanding and that they are not misguided and their doubts are cleared. Some optimism also came with report that foreign direct investment (FDI) equity inflows into India grew 21 per cent to $35.33 billion during April-October period of the current financial year. In the year-ago period, FDI equity inflows stood at $29.31 billion. Markets extended their gains in late afternoon session, as traders were getting encouragement, with report that retail inflation for industrial workers eased to 5.27 per cent in November compared to 5.91 per cent in October, mainly due to lower prices of certain food items. However, key gauges pared some gains in final minutes of trade, as some concern came with a report by India Ratings stating that the economy, though projected to grow 9.6 per cent in the next financial year in year-on-year growth term, may grow just 1 per cent in real terms to Rs 147.17 lakh crore as against Rs 145.66 lakh crore in 2019-20, at the 2011-12 price. Besides, contracting for the ninth consecutive month, the growth of eight core infrastructure industries dropped by 2.6 per cent in November 2020 as compared to same period of last year, mainly due to decline in production of natural gas, refinery products, steel and cement. Finally, the BSE Sensex rose 117.65 points or 0.25% to 47,868.98, while the CNX Nifty was up by 36.75 points or 0.26% to 14,018.50.