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Benchmarks likely to open in green; Services PMI eyed

Asian markets are trading mostly in green on Wednesday, while the US markets ended higher on Tuesday

Indian markets ended at record closing highs on Tuesday, with the Nifty 50 index settling above 16,100, as a wave of bullishness driven by earnings and hopes of recovery hit investors. Today, benchmarks are likely to open in the green following gains in global markets. Investors’ focus will remain on the ongoing earnings season, the RBI MPC meet that will kick off today and the macroeconomic data viz Markit Services and Composite PMI numbers for July to be out later in the day. Traders will take note of report that the Central Board of Direct Taxes (CBDT) has extended the due dates for electronic filing of various forms under the Income-tax Act, 1961 considering the difficulties reported by the taxpayers and other stakeholders in the electronic filing of certain Forms. However, traders may be concerned with report that the reproduction number of coronavirus has increased beyond one in eight states across the country with the health ministry sounding cautious that the second wave of the epidemic was still raging. There may be some cautiousness as the government informed Parliament that it expects the total debt as percentage of GDP to increase to 61.7 per cent (provisional) in 2021-22 from 60.5 per cent (provisional) in the previous fiscal. At the same time, public debt would rise to 54.2 per cent in the current financial year from 52 per cent in 2020-21. Besides, GST officers have detected tax evasion of Rs 7,421 crore in the April-June period of the current fiscal. Meanwhile, with the markets at record highs amid economic challenges because of the Covid pandemic, Union Finance Minister Nirmala Sitharaman said the government, the Reserve Bank of India, and the Securities and Exchange Board of India are regularly monitoring the behaviour of the financial markets. There will be some reaction in NBFCs stocks as rating agency Icra said the asset quality of non-banking finance companies will see elevated stress levels in the near term due to the second wave of the pandemic, but the stress will subside subsequently as collection efficiencies improve and restructuring picks up. Auto component industry stocks will be in focus as industry body ACMA (Auto Component Manufacturers Association) said India’s auto component industry saw the cumulative revenue decline 3 per cent to Rs 340 lakh crore in the year that ended in March 2021. There will be some reaction in hotel industry stocks as Hotel Association of India (HAI) has sought the Union government's help to revive the hospitality industry, including by extending one-time restructuring of loans. Devyani International, Windlas Biotech, Exxaro Tiles, and Krsnaa Diagnostics’ IPO will today open for subscription. Devayni International is looking to raise Rs 1,838 crore; Windlas Biotech will raise Rs 401 crore; Krsnaa Diagnostics will raise Rs 1,213 crore, and Exxaro Tiles will raise just Rs 161 crore.

The US markets ended higher on Tuesday led by gains in the Oil & Gas, Healthcare and Basic Materials sectors. Asian markets are trading mostly in green on Wednesday led largely by strong US corporate earnings, although the mood remained cautious as the rapidly spreading Delta variant of the coronavirus clouds the global economic outlook.

Back home, Gaining for the second straight session, Indian equity benchmarks ended at a record closing high on Tuesday, on hopes of faster pace of economic recovery as various macro-economic indicators pointed towards demand revival in the economy. Markets made positive start, as preliminary data released by the commerce and industry ministry showed merchandise exports grew 48 per cent YoY in July to $35.17 billion on account of a rise in global orders in shipments of petroleum products, engineering products, gems and jewellery segments. Adding more optimism, Finance Minister Nirmala Sitharaman states that the government’s net tax revenues grew 5 per cent in the fiscal year ended March 31, 2021 (FY21). The net tax (sum of direct and indirect taxes) revenue in 2020-21 was over Rs 14.24 lakh crore, a nearly 5 per cent growth from Rs 13.56 lakh crore in the previous financial year. Benchmarks continued their upward rally in late afternoon session, as better than expected corporate earnings in June quarter added to the bullish investors' sentiment. Adding the optimism among the market participants, markets regulator Sebi has reduced the minimum application value of REITs and InvITs, and revised trading lot to one unit for these emerging investment instruments to make them attractive for retail investors. The minimum application value has been cut down to the range of Rs 10,000-15,000 for both REITs and InvITs, compared to the earlier requirement of Rs 50,000 for REITs and Rs 1 lakh for InvITs, Sebi said in two separate notifications dated July 30. Investors didn’t give any heed to the National Statistical Office’s (NSO) periodic labour force survey stated that unemployment rate rose to 13.3 percent in July-September 2020 as compared to 8.4 percent in the year-ago period. Joblessness or unemployment rate (UR) is defined as the percentage of unemployed persons in the labour force. The UR was 20.9 per cent in April-June 2020. Finally, the BSE Sensex rose 872.73 points or 1.65% to 53,823.36, while the CNX Nifty was up by 245.60 points or 1.55% to 16,130.75.