Markets to get negative start tracking lackluster global cues

Indian markets erased day's gains to end marginally lower on Tuesday dragged by selling in auto and IT stocks. Today, the markets are likely to make negative start tracking lackluster global cues. Traders will be concerned as India recorded a spike of 43,957 new infections, taking the total caseload to 30,662,896, according to Worldometer. The death count increased to 404,240 with 930 new fatalities, the data showed. There will be come cautiousness as goods and services tax collections fell below the Rs 1-trillion mark for the first time in nine month in June to a 10-month low, as economic activity got disrupted due to the second Covid-19 wave. However, some respite may come later in the day as External Affairs Minister S Jaishankar said India is coming out of the second wave of the coronavirus pandemic and it will witness a strong economic recovery and contribute to being an engine of growth for the global economy. Some support will come as the Reserve Bank of India (RBI) will conduct open market purchase of government bonds worth Rs 20,000 crore under the G-sec Acquisition Programme (G-SAP 2.0) on July 8. There will be some buzz in aviation stocks as credit rating agency ICRA in its report said domestic air passenger traffic was back to the growth trajectory in June amid the falling number of COVID-19 cases in the country with around three million passengers flying on local routes in the previous month as against around two million in May. There will be some reaction in real estate industry stocks with a private report stating that the economic uncertainty caused by the second wave of the coronavirus pandemic has forced real estate developers in India to adopt a more cautious approach towards spending, which is reflected in new supply numbers for the April-June period (Q2) of 2021. Meanwhile, two IPOs - Clean Science & Technology and GR Infraprojects - will open on Wednesday to raise a total of Rs 2,500 crore.

The US markets ended mostly lower on Tuesday with financials and other groups closely tied to economic growth leading declines. Asian markets are trading mostly in red on Wednesday as concern over the economic recovery from the pandemic, virus variants and China’s scrutiny of the technology sector sapped sentiment.

Back home, after hitting record levels, Indian equity benchmarks erased all the day’s gains and closed marginally lower on Tuesday tracking losses in index majors Tech Mahindra, TCS, Maruti Suzuki and Reliance Industries amid a largely weak trend in global markets. After making cautious start, key indices traded flat with a positive bias, as traders found some solace with data from the Reserve Bank of India showed the government's Emergency Credit Line Guarantee Scheme (ECLGS) significantly boosted credit growth for the micro, small and medium enterprises (MSMEs) in the financial year ending March 2021 even as concerns about asset quality of this segment grew. Markets added gains in late morning session taking support from private report that business resumption activity continued to increase for the sixth straight week after the second wave-induced lockdowns started getting lifted. It noted that the Nomura India Business Resumption Index (NIBRI) rose up to 91.3 for the week ended June 4, from 86.3 the previous week, and is only 8.7 percentage points (pp) below pre-pandemic levels and 3.6 pp below pre-second wave level. However, Indian shares reversed course to tick marginally lower, as traders turned wary with SBI Research in its latest report stated that household debt has sharply jumped to 37.3 per cent of the Gross domestic product (GDP) in the pandemic year (FY21) from 32.5 per cent in FY20, confirming the deeper financial impact of COVID-19. It also warned that the ratio may rise further this fiscal due to the second wave of the pandemic. However, losses were limited as some optimism remained among traders with the Reserve Bank of India’s (RBI) statement that the first purchase of government securities for an aggregate amount of Rs 20,000 crore under the G-sec Acquisition Programme (G-SAP 2.0) will be conducted on July 8, 2021. The RBI will purchase five government securities of different maturities through a multi-security auction using the multiple price method. Meanwhile, the government has decided not to impose anti-dumping on imports of certain copper products, used in the electrical industry, from China, Thailand, Korea and three other countries. In April, the commerce ministry’s arm Directorate General of Trade Remedies (DGTR) recommended imposing the duty on copper and copper alloy flat-rolled products from China, Korea, Malaysia, Nepal, Sri Lanka and Thailand, after conducting a probe. Finally, the BSE Sensex fell 18.82 points or 0.04% to 52,861.18, while the CNX Nifty was down by 16.10 points or 0.10% to 15,818.25.