IGI Logo

Indian markets pared morning gains and ended in the red on Wednesday weighed by banking and financial stocks as they fell sharply from the day's high. Today, the markets are likely to make flat-to-positive start of new month amid mixed macroeconomic data and lackluster global cues. Investors are looking ahead to the manufacturing PMI data to be out later in the day. Sentiments will get a boost as Principal Economic Adviser (PEA) Sanjeev Sanyal said the Indian economy is likely to witness close to double-digit growth in the current fiscal year despite the second Covid-19 wave ravaging the country. Some support will come as data released by the RBI showed India reported a current account surplus of 0.9 percent of GDP in the pandemic-hit FY21, as against a deficit of 0.9 percent in FY20.  Additionally, the finance ministry retained the interest rate on small savings schemes for the September quarter. The scheme will continue to fetch small investors better rates than other fixed income avenues such as bank fixed deposits (FDs). Traders may take note of report that India’s fiscal deficit in April-May stood at 8.2 per cent of the budget estimates (BE), as compared to 59 per cent in the same period last year. The deficit was less 30 per cent less of last-year's level of Rs. 4.7 trillion amid the nationwide lockdown to contain the coronavirus. However, there may some cautiousness as with second wave nowhere close to waning, India recorded 48,878 infections and 991 fatalities in the last 24 hours. The country's total coronavirus caseload stands at 30,410,577, while the death toll has jumped to 399,475. Besides, India’s eight core sectors grew 16.8% year-on-year in May compared to April’s 60.9% jump on account of a weak base the same period last year when factories shut due a nationwide lockdown for coronavirus. Auto stocks will be buzzing the today’s session reacting to their monthly sales data, amid expectations of sequential improvement. Power stocks will be in focus as the Union Cabinet Committee of Economic Affairs gave its nod to a new scheme for revival of the power distribution sector in India. This is the second reform scheme for power distribution companies (discoms) announced by the BJP government, a year after the ambitious UDAY scheme concluded. There will be some reaction in hospitality industry stocks with ICRA’s report that the second wave of the coronavirus pandemic has derailed the recovery of the hospitality industry, which is now expected to return to pre-Covid levels only in 2023-24. Banking stocks will be in limelight as Standard and Poor's (S&P) said Indian banks face systemic risks as the country wades through the aftermath of the Covid-19 second wave. A separate report stated that banks will now have to surrender current accounts of all companies or corporate borrowers, where their loan exposure is less than 10 percent of the total approved facilities.

The US markets ended mostly higher on Wednesday continuing its comeback from a steep drop in early 2020 at the onset of the coronavirus pandemic. Asian markets are trading mixed on Thursday as investors await the release of Chinese economic data.

Back home, Indian equity benchmarks wiped out entire intraday gains and ended marginally lower on Wednesday, as investors booked profits at higher levels. The benchmarks traded on a positive note for most part of the day, as traders took encouragement with Chief Economic Adviser (CEA) K V Subramanian’s statement that a number of reforms undertaken by the government in the last one year especially focused on removing supply side frictions are expected to spur investment, including foreign investment. Sentiments remained positive as Finance Minister Nirmala Sitharaman exhorted ministries to aim to achieve more than their capital expenditure (capex) targets for this fiscal, highlighting that enhanced spending will play a critical role in revitalising the economy post-pandemic. Some support also came as the Union Cabinet may soon clear a proposal to provide government guarantee to security receipts issued by the National Asset Reconstruction Company (NARCL) as part of resolution of bad loans. Indian Banks' Association (IBA), entrusted with the task of setting up a bad bank, has pegged the government guarantee to be around Rs 31,000 crore. However, key gauges gave up gains during closing hours, as traders got anxious with the Reserve Bank of India’s (RBI) data showing that credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns. It said personal loans continued to grow at robust pace and recorded 13.5 per cent growth (Y-o-Y) in March 2021; industrial loan growth, on the other hand, remained negative during all quarters of 2020-21. Some cautiousness also came as a day after witnessing a sharp decline in the number of daily Covid-19 cases, India recorded 45,699 infections and 816 fatalities in the last 24 hours. The country's total coronavirus caseload stands at 30,316,000, while the death toll has jumped to 397,668. Traders took a note of minister for MSME and Road Transport and Highways Nitin Gadkari’s statement that the Manufacturing sector needs to be strengthened for employment generation and eradicate poverty. Finally, the BSE Sensex fell 66.95 points or 0.13% to 52,482.71, while the CNX Nifty was down by 26.95 points or 0.17% to 15,721.50.

Above views are of the author and not of the website kindly read disclaimer