Domestic markets trade slightly lower in early deals amid surge in coronavirus cases

Indian equity benchmarks made gap-down start on Tuesday tracking weakness in Asian peers and overnight losses on Wall Street. Soon, markets managed to trim losses and are trading lower with marginal cut of over 0.20% each in early deals. Selling in Metal, Energy and PSU stocks weighted down on the domestic indices. Rising coronavirus cases dampened the sentiments in the markets. With 16,278 fresh Covid-19 cases, India's caseload now stands at 10,357,569. The country's death toll is nearing 150,000. With 1,947,011 cases, Maharashtra has the highest number of coronavirus cases, followed by Karnataka 921,938, Andhra Pradesh 883,210, Tamil Nadu 820,712, and Kerala 778,873. Adding more pessimism, Fitch Solutions expect the rupee to trade only slightly weaker over the near term from current levels. However, downside remained capped with Minister of State for Finance Anurag Thakur’s statement that the central government is making efforts to turn India into a manufacturing and export powerhouse. Thakur said manufacturing will now be broad-based in the country.

On the global front, most of the Asian markets are trading lower following the negative cues from Wall Street amid the recent surge in coronavirus cases in several parts of the world. Investors also turned cautious ahead of two key Senate run-off elections in Georgia later today that will determine which party controls the Senate and could have a major impact on President-elect Joe Biden's economic policies.

Back  home, aviation stocks were in focus with ICRA’s report that the domestic aviation industry's net losses may reduce to Rs 14,600 crore from an estimated a net loss of Rs 21,000 crore this fiscal, with around 57 percent growth expected in revenue in FY22 on the back of a likely higher passenger traffic. In scrip specific development, KNR Constructions rallied on winning orders worth Rs 603.63 crore from Project Director, Highways (FAC), Chennai Kanyakumari Industrial Corridor Project.

The BSE Sensex is currently trading at 48069.37, down by 107.43 points or 0.22% after trading in a range of 47903.38 and 48129.79. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index gained 0.14%, while Small cap index was down by 0.13%.

The few gaining sectoral indices on the BSE were Realty up by 0.31%, IT up by 0.01%, while Metal down by 1.45%, Energy down by 0.90%, PSU down by 0.89%, Telecom down by 0.84%, Power down by 0.75% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 2.18%, HDFC up by 1.85%, TCS up by 0.85%, Hindustan Unilever up by 0.29% and Sun Pharma up by 0.10%. On the flip side, ONGC down by 2.22%, Mahindra & Mahindra down by 1.76%, NTPC down by 1.41%, ICICI Bank down by 1.20% and Bajaj Auto down by 1.16% were the top losers.

Meanwhile, India's tax pie seems to have undergone a subtle change with a sharp drop in direct tax collections resulting from a disproportionate impact of the COVID-19 carnage on incomes. The share of indirect taxes, which mainly comprise of levy on goods and services as well as import duty, has risen while that of direct taxes - made up of corporate and personal income tax - has gone down in 2020.

Finance Secretary Ajay Bhushan Pandey has said that in a pandemic like this where the economy has been impacted, any large scale changes impact direct taxes more severely, whereas indirect tax collection is mostly proportional to business turnover and compliance. He also said 'in a situation like this where the economy has been impacted and we are on the recovery path, the direct taxes are impacted more severely because the profitability of a company is not directly proportional to the turnover always. If your turnover reduces below a certain benchmark then the profit will not merely reduce, but it may get into a negative zone and therefore the company may not pay any income tax as it will be into a loss.'

Pandey said ‘similarly, when we are in a recovery phase, the companies will take a longer time to come into the profitable zone to pay income tax. In the case of indirect tax, it is more or less proportional to the business volume and turnover and compliance’.

The CNX Nifty is currently trading at 14099.85, down by 33.05 points or 0.23% after trading in a range of 14048.15 and 14115.70. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 2.35%, HDFC up by 2.04%, TCS up by 0.81%, HDFC Life Insurance up by 0.77% and Hero MotoCorp up by 0.38%. On the flip side, Tata Motors down by 2.80%, ONGC down by 2.17%, Hindalco down by 2.01%, Mahindra & Mahindra down by 1.94% and NTPC down by 1.62% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 lost 87.77 points or 0.32% to 27,170.61, Straits Times declined 9.37 points or 0.33% to 2,849.53, Hang Seng fell 83.85 points or 0.31% to 27,388.96, KOSPI inched down 2.20 points or 0.07% to 2,942.25 and Shanghai Composite was up by 1.76 points or 0.05% to 3,501.20. On the other hand, Taiwan Weighted surged 72.42 points or 0.49% to 14,974.45 and Jakarta Composite increased 31.47 points or 0.52% to 6,136.37.