Markets likely to make cautious start on Tuesday

Indian markets ended higher on Monday led by gains in metals and FMCG stocks. Today, markets are likely to make cautious start amid weakness in global markets. There will be some cautiousness as India recorded 24,725 new Covid-19 cases and 438 deaths in the past 24 hours, taking its tally to 32,249,900 and the death toll to 432,112. Kerala reported 12,294 new infections, Maharashtra 4,145, followed by Andhra Pradesh (909), Tamil Nadu (1,851), Karnataka (1,065), West Bengal (502) and Delhi (27). However, traders will be taking encouragement with report that Finance Minister Nirmala Sitharaman said that she expects inflation to remain in the prescribed range during the current fiscal. The RBI has been mandated to keep inflation at 4 per cent, with tolerance level of 2 per cent on either side. Some optimism may also come with report that investments by private equity and venture capital funds doubled to a record high of $9.5 billion in July mainly driven by higher investor interest in the e-commerce sector. Private equity (PE) and venture capital (VC) investments stood at $4.1 billion in the year-ago period. Some support will come as Finance Minister Nirmala Sitharaman said that the rules for the recent taxation amendment bill will be framed soon. She said we will have to wait for the rules to be framed under the recent taxation amendment bill. There will be some buzz in oil & gas industry stocks as Finance Minister Nirmala Sitharaman ruled out a cut in excise duty on petrol and diesel to ease prices, which have touched an all-time high, saying payments in lieu of past subsidised fuel pose limitations. Tyre industry stocks will be in focus as automotive Tyre Manufacturers Association (ATMA) asked the government to allow duty-free import of natural rubber as shortage of the commodity in India has become a major deterrent for the tyre industry to support domestic manufacturing. According to the tyre industry body, natural rubber (NR) consumption is expected to increase further and the annual demand is expected to cross 13 lakh tonnes this fiscal. There will be some reaction in sugar industry stocks with report that the Indian Sugar Mills Association (ISMA) has written to the Prime Minister’s Office (PMO) to immediately increase the Minimum Sale Price (MSP) of sugar from the current Rs 31 per kg to at least Rs 34-35 per kg to help it clear the pending sugarcane dues ahead of the new crushing season that will start from October 2021. Meanwhile, the Civil Aviation Ministry gave conditional permission to 10 organisations, including Mahindra and Mahindra, Steel Authority of India (SAIL) and Bayer Crop Science, to use drones for various purposes.

The US markets ended mostly in green on Monday as investors managed to shrug off new concerns about China's economy, the coronavirus Delta variant and turmoil in Afghanistan to largely drive stocks higher while also boosting some more defensive investments. Asian markets are trading mostly in red on Tuesday as investors continue to monitor the Covid situation in the region.

Back home, Indian equity benchmarks closed at record closing highs on Monday led by gains Metal, Energy and Oil & Gas stocks. Benchmarks started session on a sluggish note, as traders were cautious with a private report stated that it is highly unlikely that India will become a $5 trillion economy by 2024-25 due to the slowdown caused by the COVID-19 pandemic. Besides, India recorded 33,221 new Covid-19 cases and 421 deaths in the past 24 hours, taking its tally to 32,225,175 and the death toll to 431,674. However, key indices recovered from early losses as the data released by the commerce ministry showed that the country's exports surged 49.85 per cent to $35.43 billion in July on account of healthy growth in petroleum, engineering, and gems and jewellery segments, even as the trade deficit widened to $10.97 billion during the month. Some support also came as RBI data showed country's foreign exchange reserves increased by $889 million to a lifetime high of $621.464 billion in the week ended August 6, 2021. Trading sentiments remained positive in late afternoon deals, as India's annual wholesale price inflation eased to 11.16% in July from the previous month's 12.07%, helped by lower increases in the cost of fuel and food items. A low-base effect also contributed to the WPI inflation in July, since it stood at minus 0.25% in the corresponding month of 2020. Traders got some support with ICRA Ratings’ report stated that most states are likely to be in better fiscal health this financial year as 20 of them are collectively carrying forward Rs 2.6 lakh crore borrowed in FY21 to this fiscal. It said this also explains why the states have been borrowing less so far this year despite the pandemic-driven revenue crunch and the soaring public expenses towards health and food.  Traders also remained positive as Prime Minister Narendra Modi announced an ambitious Rs 100 lakh crore holistic infrastructure development program Gatishakti, which is aimed at boosting employment opportunities and productivity of industries. Finally, the BSE Sensex rose 145.29 points or 0.26% to 55,582.58, while the CNX Nifty was up by 33.95 points or 0.21% to 16,563.05.