Markets likely to make cautious start on Tuesday

Indian markets ended at record high levels on Tuesday led by strong buying in the IT and private banks. Today, the markets are likely to make cautious start amid mixed Asian cues. Also, investors will be eyeing Markit Services PMI data for December slated to be released later in the day for further cues. Rising coronavirus cases in the country are likely to dampen sentiments in markets. With 17,908 fresh Covid-19 cases, India's caseload now stands at 10,375,478. The country's death toll has crossed the 150,000-mark. One more patient at a Delhi government-run hospital has been found infected with the UK strain of novel coronavirus, taking the tally in the national capital to nine. Traders will be concerned with the World Bank’s statement that India’s economy is estimated to contract by 9.6 percent in the fiscal year 2020-21, reflecting a sharp drop in household spending and private investment, and the growth is expected to recover to 5.4 percent in 2021. However, some respite may come later in the day as the finance ministry said the impending vaccination drive in various countries, coupled with sustained improvement in high frequency indicators, helped the economy perform better in H2FY21. Some support may come with report that Union Health Secretary Rajesh Bhushan said the government has not banned the export of COVID-19 vaccines. The Ministry of Health, Ministry of Commerce and Industry, Department of Promotion of Industry and Internal Trade (DPITT) or the Directorate General of Foreign Trade (DGFT) have not made any changes to export rules, thus, vaccine exports are allowed. Traders may take note of report that the Union Budget for 2021-2022 will be presented on February 1. The Cabinet Committee on Parliamentary Affairs (CCPA) has said the Budget will be presented on February 1 and President Ram Nath Kovind will address a joint sitting of both the Houses of Parliament on January 29. Meanwhile, the Reserve Bank of India has introduced the Legal Entity Identifier (LEI) for large value transactions over Rs 50 lakhs in Centralised Payment Systems, which will be effective from April 1, 2021. Logistics industry stocks will be in focus with a private report that the commerce ministry has sought views of different departments on its proposed national logistics policy which aims at enhancing productivity and competitiveness of manufacturers by reducing cost of logistics. There will be some reaction in telecom stocks as the Department of Telecom is expected to issue the notice for upcoming spectrum auction this week that will have timelines and rules to bid for airwaves.

The US markets ended higher on Tuesday in choppy trading as investors anxiously awaited results of US runoff elections in Georgia that would determine the legislative balance of power in the world’s largest economy. Asian markets are trading mixed on Wednesday as investors anxiously awaited results of US runoff elections that would determine the legislative balance of power in the world's largest economy while oil prices rose on news of planned output cuts.

Back home, Indian equity benchmarks once again settled at record closing highs on Tuesday, led by strong buying in Banking, Finance and IT stocks. The benchmarks staged a gap down opening, mirroring losses in other Asian markets. Sentiments remained down-beat with report that under the Trump administration, US-India tensions have increased over each side’s tariff policies. It also noted that the two sides have also held concerted negotiations to address these trade frictions. Some concern also came amid reports that 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. Market participants also took a note of Union Health and Family Welfare Minister Dr Harsh Vardhan’s statement that the coronavirus pandemic has turned the clock back by many years and the lockdowns have raised insurmountable barriers and imposed many roadblocks. However, late hour buying helped benchmarks recover from intraday lows and settled higher. Some optimism also came 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. Besides, the Ministry of Finance has released the 10th weekly instalment 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. The remaining 5 States, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation. Finally, the BSE Sensex rose 260.98 points or 0.54% to 48,437.78, while the CNX Nifty was up by 66.60 points or 0.47% to 14,199.50.