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Indian markets closed flat for the second day straight on Thursday but remain within touching distance of all-time highs, amid the F&O expiry of the August series. Today, the markets are likely to make flat-to-positive start amid mixed Asian cues. Some support will come as Finance Minister Nirmala Sitharaman discussed with her BRICS counterparts the key areas of cooperation that would be crucial in supporting recovery of the grouping's economies and maintaining macroeconomic stability, while protecting against future uncertainties posed by the COVID-19 pandemic. However, jitters over the US Federal Reserve's Jackson Hole Symposium compounded with twin blasts in Afghanistan may keep upside in check. Traders may be concerned as Moody’s Investors Service said second wave of Covid infections has increased asset risks for Indian banks, but a severe deterioration is unlikely. It said that the second wave of coronavirus infections in India has exacerbated stress among individuals and small businesses that were hit the hardest by the initial outbreak. Still, a number of factors will prevent sharp increases in problem loans, and banks have sufficient buffers to absorb anticipated loan losses. Also, Foreign Institutional Investors (FII) were net sellers of domestic equities for the 8th consecutive trading session yesterday. FIIs pulled out Rs 1,974 crore from domestic markets. Besides, India recorded a spike of 44,558 new Covid-19 cases in the past 24 hours out of which, over 31,000 were from Kerala.  Meanwhile, Markets regulator Sebi came out with detailed modalities for implementation of the accredited investors framework, a move expected to open up a new channel of raising funds from sophisticated investors.  Aviation stocks will be in focus as India's air safety regulator said it had cleared Boeing Co's 737 MAX aircraft to fly with immediate effect, ending its nearly two-and-a-half-years of regulatory grounding in a key travel market for Boeing. There will be some reaction in tobacco industry stocks as Indian Tobacco Association said it has urged the government to include tobacco under the tax rebate scheme RoDTEP (Remission of Duties and Taxes on Exported Products) with an aim to encourage exports from the sector. Besides, Two IPOs will open for subscription next week, continuing the IPO rush on Dalal Street. Ami Organics IPO along with that of Vijaya Diagnostic Centre. While the latter is looking to raise Rs 1,895 crore from the IPO, the former’s public issue will include a fresh issue of equity shares worth Rs 200 crore and an offer-for-sale (OFS) of up to 60.59 lakh equity shares.

The US markets ended lower on Thursday as the situation in Afghanistan escalated with an explosion near the Kabul airport and comments from FOMC members favoured tapering by the Federal Reserve. Asian markets are trading mixed on Friday as slight gains in China were balanced by declines elsewhere and investors globally turned cautious ahead of a long-awaited speech by Fed Chair Jerome Powell.

Back home, Indian equity benchmarks ended on a flat note for second straight session on Thursday. After making cautious start, markets gained momentum as traders took some support with finance minister Nirmala Sitharaman’s statement that State-run banks will undertake a nation-wide loan outreach programme around October, as the government seeks to stir economic growth through sustained credit push, especially to Covid-hit small and medium businesses, retail and farm sectors, amid fears that bankers have turned risk-averse. Domestic sentiments were positive with Union Heavy Industries Minister Mahendra Nath Pandey’s statement that the government is working on establishing charging infrastructure across the country in order to promote faster adoption of electric vehicles (EVs) in the country.  Some optimism also came with Union minister Nitin Gadkari’s statement that the government looks to increase the contribution of the automobile sector to India's GDP to 12 per cent from the present 7.1 per cent and grow employment generation to 50 million from the current 37 million. The breadth of the market remained positive in late morning session with private report stating that the Indian economic growth likely to touch record high in the quarter through June, reflecting a very weak base last year and a rebound in consumer spending. The rebound came despite the drag from the deadly second wave of the coronavirus, which forced states across India to reimpose localised lockdowns and stop mobility completely from late April to early June. However, markets erased initial gains and turned volatile in second half of the session, as traders turned cautious with rating agency Moodys stating that India's second Coronavirus (Covid-19) wave is increasing asset risks for banks in retail and the SME loan segment. However, factors like tight credit underwriting, strong loss provisions will help banks withstand pressures and prevent a sharp rise in bad loans. Finally, the BSE Sensex rose 4.89 points or 0.01% to 55,949.10, while the CNX Nifty was up by 2.25 points or 0.01% to 16,636.90.

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