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Market Commentary 06 August 2021
Markets to get flat opening ahead of RBI policy outcome


Indian equity benchmarks trimmed gains ahead of the closing bell but managed to settle at fresh closing peaks on Thursday, amid buying in Telecom, Metal and TECK stocks. Benchmark indices began trading session in the green but soon turned in red terrain, as traders got anxious with private report stated that Micro, Small and Medium Enterprises (MSMEs) in India have seen an average 11 per cent decline in business volume due to lockdowns in 2021, compared to 46 per cent during the 2020 nationwide lockdown. Some concern also came with report that India's monetary policy makers are likely to leave interest rates untouched for a seventh straight meeting, as their focus remains more on fixing a fickle economy than on controlling stubborn price pressures. The Reserve Bank of India's six-member Monetary Policy Committee is meeting amid weak indicators raising doubts about the economy's ability to sustain a nascent recovery. However, markets moved higher in afternoon trading, as industry chamber PHDCCI has called for a 3-tier GST rate structure, with the highest slab at 18 per cent, in order to help boost consumption and reduce evasion. Under the Goods and Services Tax (GST), a four-rate structure that exempts or imposes a low rate of tax 5 per cent on essential items and top rate of 28 per cent is levied. The other slabs of tax are 12 and 18 per cent. Besides, a 3 per cent rate is applied on gold, silver and processed diamonds. Traders also found some support as the Rajya Sabha passed the Limited Liability Partnership (Amendment) Bill, which seeks to encourage the start-up ecosystem and further boost ease of doing business, amid uproar by the opposition on Pegasus snooping row and other issues. Meanwhile, the Reserve Bank of India (RBI) gave banks time till October 31 to comply with its guidelines on current account and overdraft facilities, by which time banks must come to a resolution on the issue. Finally, the BSE Sensex rose 123.07 points or 0.23% to 54,492.84, while the CNX Nifty was up by 35.80 points or 0.22% to 16,294.60. 


The US markets ended higher on Thursday following the release of a report from the Labor Department showing a modest decrease in first-time claims for US unemployment benefits in the week ended July 31st. The report said initial jobless claims slipped to 385,000, a decrease of 14,000 from the previous week's revised level of 399,000. Street had expected jobless claims to dip to 384,000 from the 400,000 originally reported for the previous week. The Labor Department said the less volatile four-week moving average also edged down to 394,000, a decrease of 250 from the previous week's revised average of 394,250. On the sectorl front, Airline stocks showed a substantial rebound on the day, with the NYSE Arca Airline Index soaring by 4.3 percent following a 2.4 percent nosedive on Wednesday. Significant strength also emerged among brokerage stocks, driving the NYSE Arca Broker/Dealer Index up by 2.6 percent to its best closing level in well over a month. However, a separate report from the Commerce Department showed the US trade deficit widened by more than expected in the month of June, reaching a new record high. The Commerce Department said the trade deficit widened to $75.7 billion in June from a revised $71.0 billion in May. Street had expected the trade deficit to widen to $74.1 billion from the $71.2 billion originally reported for the previous month. The wider than expected trade deficit came as the value of imports jumped by 2.1 percent to $283.4 billion, while the value of exports rose by 0.6 percent to $207.7 billion.


Crude oil futures ended higher on Thursday, regaining ground after moving sharply lower over the three previous sessions. Oil prices rose on concerns about rising Middle East tensions, as Israeli aircraft struck what its military said were rocket launch sites in south Lebanon early on Thursday in response to earlier projectile fire towards Israel from Lebanese territory. Two rockets launched from Lebanon on Wednesday struck Israel, which initially responded with artillery fire amid heightened regional tensions over an alleged Iranian attack on an oil tanker in the Gulf last week. Crude oil futures for September rose $0.94 or 1.4 percent to settle $69.09 barrel on the New York Mercantile Exchange. October Brent crude surged $0.98 or 1.4 percent to settle at $71.35 a barrel on London's Intercontinental Exchange.


Indian rupee ended marginally higher against dollar on Thursday due to fresh selling of the American currency by banks and exporters. Rupee got some support as Rajya Sabha passed the Limited Liability Partnership (Amendment) Bill, which seeks to encourage the start-up ecosystem and further boost ease of doing business, amid uproar by the opposition on Pegasus snooping row and other issues. However, upside remained capped with private report stating that Micro, Small and Medium Enterprises (MSMEs) in India have seen an average 11 per cent decline in business volume due to lockdowns in 2021, compared to 46 per cent during the 2020 nationwide lockdown. On the global front, pound rose on Thursday ahead of a Bank of England meeting at which policymakers are expected to keep stimulus pumping despite rising inflation and a strong economic recovery. Finally, the rupee ended 74.17, stronger by 2 paise from its previous close of 74.19 on Wednesday.


The FIIs as per Thursday's data were net buyers in both equity and debt segment. In equity segment, the gross buying was of Rs 10407.92 crore against gross selling of Rs 6941.97 crore, while in the debt segment, the gross purchase was of Rs 724.11 crore with gross sales of Rs 579.85 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.90 crore against gross selling of Rs 12.33 crore.


The US markets ended higher on Thursday as unemployment claims declined and the trade deficit widened - positive economic data in the face of rising COVID-19 cases and signals of declining Federal Reserve stimulus. Asian markets are trading mostly in red on Friday as investors await the release of a closely watched US jobs report. Indian markets ended off-day's high on Thursday as gains in metals and IT stocks were capped by losses in banks. Today, the start of session is likely to be flat ahead of the Reserve Bank of India's (RBI) bi-monthly monetary policy announcement. The RBI is set to announce its decision on key interest rates in its bi-monthly monetary policy review on Friday at 10 am. As per a private report, the chances of any revision in interest rates are less, the street is expecting a roadmap for the inevitable policy normalisation. There will be some cautiousness with report that India's production of two Covid-19 vaccines will increase from September, but its target of having 1.35 billion doses by August and December looks difficult. However, traders may be taking encouragement with industry chamber PHDCCI's statement that the economy is recovering at a fast pace from the recent lows of April and May on the back of declining new coronavirus cases, continued unlocking in various parts of the country and calibrated economic reforms announced by the government. Traders may take note of report that putting an end to the contentious retrospective tax law that hit the confidence of foreign investors, including Vodafone and Cairn, for years, Finance Minister Nirmala Sitharaman has introduced a Bill in Parliament to nullify the provision in the Income Tax Act. US-India Strategic and Partnership Forum (USISPF) has applauded the Indian move to withdraw the retrospective law relating to tax on indirect transfers. There will be some buzz in the aviation industry stocks with ratings agency ICRA's report that domestic air passenger traffic sequentially grew by 56-57 per cent at around 48-49 lakh in July. The domestic air passenger traffic stood at 31.1 lakh in June 2021. According to the ratings agency, the growth on YoY basis was 132 per cent. Meanwhile, shares of Glenmark Life Sciences will make their Dalal Street debut. The IPO of the company was 44.17 times last month, helping the company raise Rs 1,513 crore. Apart from the listing, eyes will also be glued on the four IPOs that will close for subscription today. There will be lots of earnings reaction based on the performance of the companies.


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  • Reliance Industries is planning to double its capacity to recycle plastic bottles after a third-party recycled polyester staple fibre manufacturing facility is set up in Andhra Pradesh. 
  • Dr Reddy's Laboratories has entered into a definitive agreement with BioDelivery Sciences International, Inc., to sell its US and Canada territory rights for Elyxyb 25 mg/mL to the US-based firm. 
  • Bharti Airtel has partnered with Google Cloud and Cisco to launch Airtel Office Internet - a unified enterprise grade solution for the emerging digital connectivity needs of small businesses, SOHOs and early stage tech start-ups. 
  • Titan Company has reported consolidated net profit attributable to owners at Rs 20 crore for the Q1FY22 as compared to net loss of Rs 291 crore for Q1FY21.  
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