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Benchmarks likely to make optimistic start on firm global cues

Indian markets ended higher on Tuesday with gains of around a percent, following gains in Asian peers, mainly boosted by banking, financials and IT stocks. Today, the markets are likely to get positive start amid firm global cues. Traders will be taking encouragement as the Organization for Economic Co-operation and Development (OECD) raised the projection for India’s economic growth rate by 4.7 percentage points at 12.6 per cent for 2021-22. That would enable India to retain its earlier tag of the fastest growing large economy in the world. Also, CRISIL has projected India’s economy to grow by 11 per cent in the next fiscal year against expected contraction of 8 per cent in 2020-21, but GDP will still tread below the pre-Covid trend. It added that next year would be a story of two halves with broad-based recovery to come in the second half. Some support will come as Finance Minister Nirmala Sitharaman said monetisation of CPSE assets is based on the principle of value creation for the government and investors and would bring about a paradigm shift in infrastructure augmentation and maintenance. Traders may take note of report that the Finance Ministry said the Centre has released Rs 1.06 lakh crore to the states since October 2020 to meet GST compensation shortfall. However, there may be some cautiousness as India reported 16,846 fresh Covid-19 cases on Wednesday pushing the overall tally to 11,261,470, according to Worldometer. The death toll from the deadly infection jumped to 158,079. There will be some buzz in MSME stocks as Minister of State for Finance Anurag Thakur said banks have sanctioned loans worth Rs 2.46 lakh crore to about 92 lakh accounts under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme for the MSME sector. Auto stocks will be in focus with data from the Federation of Automobile Dealers Associations (FADA) showing that retail sales of passenger vehicles rose by 10.59 per cent in February 2021 to 2,54,058 units from 2,29,734 units in the year ago period, while two-wheeler sales dropped by 16.08 per cent to 10,91,288 units from 13,00,364 units in the corresponding period last year. There will be some reaction in renewable energy sector stocks as Moody's Investors Service in its latest report said that close to 15-20 per cent of wind and solar power projects underperformed during 2019-20. However, with portfolio diversification, it said a lot of green energy companies will withstand the slowdown. The equity markets will remain closed tomorrow that is March 11 on account of Mahashivratri.

The US markets end higher on Tuesday as falling bond yields eased concerns about surging inflation. Asian markets are trading mostly in green on Wednesday following overnight gains on Wall Street, although focus will shift to Chinese markets amid worries about policy tightening in the world’s second-largest economy.

Back home, Indian equity benchmarks moved significantly higher amid heightened volatility on Tuesday, mainly driven by buying in banking, financial and IT stocks amid positive cues from global markets. The benchmarks made gap-up opening, as traders got some support with Finance Minister Nirmala Sitharaman’s statement that the fiscal measures taken by the government have resulted in positive growth of 0.4 per cent in the third quarter of the current financial year. The minister further said that the gradual unlocking of the economy has eased supply-side disruptions enabling inflation to decline from 7.6 per cent in October, 2020 to 4.1 per cent in January 2021, mainly on account of decline in food inflation. She added that the economy is estimated to contract by 8 per cent during 2020-21 due to the impact of the COVID-19 pandemic. Sentiments remained positive with Chief Economist of the IMF Gita Gopinath’s statement that India has been at the forefront in fighting the coronavirus pandemic and ‘really stands out’ in terms of its vaccine policy. She noted that India has been providing vaccines through grants to several of its neighbour countries, including Bangladesh, Nepal and Myanmar, and through commercial arrangements as well. However, markets gave up gains in afternoon trading, as some concern came with Fitch Ratings’ report stated that the impact of Covid-19 pandemic is likely to pose challenges to improving financial performance of Indian banks once asset-quality risks manifest in the financial year ending March 2022 (FY22). The banks reported lower impaired loans and improved profitability for nine months ended December 2020 due to various forbearance measures and continued large write-offs. But late buying in private banks and IT shares helped benchmarks close near the day's highest levels. Traders found support after Ministry of Finance, Department of Expenditure has released the 19th weekly installment of Rs 2,104 crore to the States. Out of this, an amount of Rs 2,103.95 crore has been released to 7 States and an amount of Rs. 0.05 crore has been released to the Union Territory of Puducherry. Meanwhile, 15th Finance Commission Chairman NK Singh has called for setting up a Fiscal Council like institution to better manage the debt trajectory of the Centre and states. He also highlighted the ‘substantial’ increase in the proportion of cess and surcharge in Gross Tax Revenue (GTR) in the past 10 years, saying only if a Constitutional amendment is introduced to include a portion of it into the divisible pool, then states' could get a share of the revenue earned under that head. Finally, the BSE Sensex rose 584.41 points or 1.16% to 51,025.48, while the CNX Nifty was up by 142.20 points or 0.95% to 15,098.40.

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