Indian equity benchmarks erased most of their initial gains and closed flat with a positive bias on Tuesday amid high volatility and tepid cues from global markets. The benchmarks had a gap-up opening, with report that a day after surging past the 150,000-mark, India's count of active cases has dropped to 148,882. On Monday, the country registered 10,792 fresh Covid-19 cases, taking its the caseload tally to 11,015,863. Traders took encouragement as India Ratings and Research has revised its outlook on the overall banking sector to stable for the fiscal 2021-2022 (FY22) from negative even as it sees higher stress emerging in the retail loan segment going ahead. For public sector banks (PSBs), the outlook has been revised to stable from negative and for private banks. Some support also came with domestic rating agency Icra stating that the monthly collections, including overdues in its rated retail loan pools originated largely by NBFCs and HFCs, have reached pre-moratorium levels as of December 2020. However, it said for its rated microfinance players, collections are yet to reach the pre-moratorium levels. However, key gauges trimmed most of their gains in final hour of trading session, as investment through participatory notes (P-notes) in the Indian capital market dipped marginally to Rs 84,976 crore as on January 31 after hitting 31-month high value at the end of the preceding month. At December-end, the investment through such instruments had risen to a 31-month high of Rs 87,132 crore, reflecting the bullish stance of FPIs. Separately, pitching for a status quo on rates at the last meeting of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das has opined that the growth momentum needs to be strengthened for a sustained revival of the economy and for a quick return of the level of output to the pre-COVID trajectory. Finally, the BSE Sensex rose 7.09 points or 0.01% to 49,751.41, while the CNX Nifty was up by 32.10 points or 0.22% to 14,707.80.

The US markets ended mostly higher on Tuesday as traders reacted to Federal Reserve Chair Jerome Powell's prepared remarks before the Senate Banking Committee. Powell reiterated interest rates will remain at near-zero levels and the Fed will continue its asset purchases at the current rate until substantial further progress has been made toward its goals of maximum employment and price stability. Powell said the economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. With regard to inflation, Powell acknowledged that consumer prices have partially rebounded following the steep drop last spring but noted prices for sectors that have been most adversely affected by the pandemic remain particularly soft. The Fed chief said annual inflation remains below the central bank's 2 percent target and reiterated monetary policy is likely to remain unchanged until inflation is on track to moderately exceed 2 percent for some time. On the economic data front, the Conference Board released a report showing consumer confidence has improved more than expected in the month of February. The Conference Board said its consumer confidence index rose to 91.3 in February from a downwardly revised 88.9 in January. Street had expected the consumer confidence index to inch up to 90.0 from the 89.3 originally reported for the previous month.

Crude oil futures settled marginally lower on Tuesday as traders were weighing the supply position amid reports shale oil producers in the southern United States could take at least a couple of weeks to restart the more than 2 million barrels per day of crude output that was shut down because of a deep freeze. The oil market is also looking ahead to the upcoming meeting of the Organization of the Petroleum Exporting Countries and their allies. Crude oil futures for April lost 3 cents or nearly 0.1 percent to settle at $61.67 barrel on the New York Mercantile Exchange. However, April Brent crude rose 13 cents or 0.2 percent to settle at $65.37 a barrel on London's Intercontinental Exchange.

Continuing previous session gains, Indian rupee ended marginally higher against dollar on Tuesday, owing to dollar sale by exporters and banks. This was the third consecutive session when the rupee was traded higher against dollar. Upside remain capped as investment through participatory notes (P-notes) in the Indian capital market dipped marginally to Rs 84,976 crore as on January 31 after hitting 31-month high value at the end of the preceding month. At December-end, the investment through such instruments had risen to a 31-month high of Rs 87,132 crore, reflecting the bullish stance of FPIs. On the global front, dollar touched its lowest since January 13 as investors shifted focus to how U.S. Federal Reserve chief Jerome Powell might respond to expectations of resurgent inflation, while commodity-linked currencies hovered near multi-year highs. Finally, the rupee ended at 72.46, 3 paise stronger from its previous close of 72.49 on Monday.

The FIIs as per Tuesday's data were net seller in both equity and debt segment. In equity segment, the gross buying was of Rs 9714.97 crore against gross selling of Rs 10208.32 crore, while in the debt segment, the gross purchase was of Rs 1211.10 crore against gross selling of Rs 2007.06 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.29 crore against gross selling of Rs 74.42 crore.

The US markets ended mostly higher on Tuesday after Federal Reserve Chairman Jerome Powell signaled that the central bank was nowhere close to pulling back on its support for the pandemic-damaged US economy even as he voiced expectations for a return to more normal, improved activity later this year. Asian markets are trading mixed on Wednesday on concerns about rising interest rates and rich equity valuations and following a downdraft in US and European overnight trading. Indian markets ended flat on Tuesday as gains in metal and energy stocks were capped by losses in banking and financial space like heavyweights Kotak Bank and HDFC twins. Today, the start of session is likely to be positive tracking overnight gains on Wall Street. Traders will be taking encouragement with a private report that India's GDP may turn positive at 1.3 percent in the third quarter of 2020-21, having witnessed contraction in the previous two quarters due to the coronavirus pandemic, as the number of cases is falling and public spending has started rising. Some support will come as Amitabh Kant, CEO of government policy think tank NITI Aayog, said the government was in the advanced stage of finalising the Remission of Duties and Taxes on Exported Products (RoDTEP) rates for all products. Traders may take note of report that India's count of active cases has dropped to 148,579. On Tuesday, the country registered 13,074 fresh Covid-19 cases, taking its the caseload tally to 11,028,937. Meanwhile, The National Stock Exchange (NSE) has announced changes in index maintenance guidelines, criteria and methodology. From March 31, there will be changes to revision in the index reconstitution date, stock capping, quarterly rebalancing of shares and investible weight factors, and calculation of Price to Earnings (P/E) ratio for indices. Besides, Tata Consumer Products will replace Gail India in the benchmark Nifty 50 index. The change will take effect on March 31. Telecom stocks will be in focus as the sector regulator may consider lowering the minimum price for 5G spectrum if the government directs it to do so because of concerns that the pricing set for the airwaves could hurt the rollout of the latest wireless technology. There will be some buzz in steel sector stocks with report that the commerce ministry's investigation arm DGTR has initiated a probe to review the need for continuing imposition of anti-dumping duty on certain types of steel products imported from China following complaints from domestic industry. Media, entertainment sector stocks will be in focus with ratings agency CRISIL's report that Indian media and entertainment (M&E) sector is expected to witness a strong 27 percent growth in revenue to around Rs 1.37 lakh crore in 2021-22, after contracting 26 percent this fiscal. There will be some reaction in IT sector stocks with a private report that India's IT sector is experiencing a sequential growth in hiring since the lockdown in 2020, witnessing 39 per cent growth in job postings in January compared to the previous month.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Reliance Industries has introduced contours of its demerger of its O2C enterprise right into a wholly-owned subsidiary.
• Amazon India has entered into a partnership with M&M's subsidiary -- Mahindra Electric Mobility to further strengthen its commitment towards electric mobility in the country. 
• Bharti Airtel and Qualcomm have entered into collaboration for accelerating 5G in India. 
• Tech Mahindra is planning to launch first-of-its-kind phygital (physical and digital) Global Chess League.