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Benchmarks fall for 3rd day; Nifty below 11,100 level

Indian equity benchmarks struggled for direction on Friday and closed lower for the third day in a row, weighed down by heavyweights Reliance Industries (RIL) and the HDFC twins. After making a cautious start, markets managed to keep their heads over neutral lines, taking support from trade body CII’s statement that the new set of relaxations introduced while extending the lockdown till August 31 in Tamil Nadu would pave way for quick revival of the economy besides ensuring livelihood of people. Adding some optimism, Commerce and Industry Minister Piyush Goyal said that the government is working on production-linked incentives for 12 major sectors like Active Pharmaceutical Ingredients and electronics.

But, key indices soon turned negative in late morning session as weak global markets following disappointing US gross domestic product (GDP) data, dented investor sentiment. Besides, another record spike in Covid-19 infections in the country kept the investors nervous. Investors also maintained cautious approach, as Reserve Bank of India is likely to leave repo rate unchanged in the upcoming policy review meeting and the Monetary Policy Committee may look for 'unconventional policy measures' to ensure financial stability. Market participants took a note of Former Reserve Bank of India (RBI) Governor Raghuram Rajan’s statement that bold government reform that triggers ‘animal spirits’ and implemented effectively is essential for India to come out of the Covid-19 setbacks. Rajan also made it clear that the space for expanding the balance sheet for RBI is not ‘infinite’, and the central bank will need to have a strong focus on monitoring inflation as it does that.

On the global front, Asian markets ended mostly lower on Friday, as abysmal economic data from the United States and rising global COVID-19 cases darkened the mood, despite strong U.S. tech earnings and manufacturing recoveries in China and Japan. China's official Purchasing Manager's Index (PMI) data showed that factory activity grew in July for a fifth straight month and at a faster pace, defying expectations of a slowdown, while Japan's industrial output snapped four months of declines in June. European markets were trading mostly in green, even as the euro area economy contracted at the fastest pace on record in the second quarter amid the coronavirus pandemic. Gross domestic product fell 12.1 percent on a quarterly basis, bigger than the 3.6 percent drop in the first quarter. This was bigger than the economists' forecast of 11.2 percent and was the sharpest decline seen since the series began in 1995. Back home, Gold related stocks were in focus with WGC’s report that demand of gold in India declined 70.12% during the April-June quarter of 2020 to 63.7 tonnes over last year amid nationwide lockdown to prevent the spread of COVID-19.

Finally, the BSE Sensex lost 129.18 points or 0.34% to 37,606.89, while the CNX Nifty was down by 28.70 points or 0.26% to 11,073.45.

The BSE Sensex touched high and low of 37,897.78 and 37,431.68, respectively and there were 21 stocks advancing against 9 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.36%, while Small cap index was up by 0.82%.

The top gaining sectoral indices on the BSE were Healthcare up by 3.45%, Realty up by 1.27%, Metal up by 0.79%, Basic Materials up by 0.71%, FMCG up by 0.70%, while Energy down by 1.64%, Oil & Gas down by 0.76%, Finance down by 0.62%, Bankex down by 0.11% and Auto down by 0.05% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 4.27%, SBI up by 2.63%, HCL Technologies up by 1.49%, Mahindra & Mahindra up by 1.45% and Axis Bank up by 1.36%. On the flip side, Reliance Industries down by 1.98%, HDFC Bank down by 1.69%, HDFC down by 1.55%, Asian Paints down by 1.52% and Kotak Mahindra Bank down by 1.48% were the top losers.

Meanwhile, the commerce and industry minister Piyush Goyal has said that his ministry is working for early resolution to Merchandise Export from India Scheme (MEIS) issue without having a serious impact on government finances. The commerce ministry has blocked the online system for exporters to apply for availing tax incentives under the MEIS from July 23, as the Department of Revenue decided to limit the benefits under the plan at Rs 9,000 crore for April-December 2020.

Goyal said ‘I do not have a knee jerk solution on the MEIS. But, we are in dialogue with the requisite authorities. It's not as if the MEIS is going away anywhere, its more a cash flow issue and we are all aware that COVID-19 has had a very significant impact on government revenues also’. He also said ‘but I assure you, we are on top of it. We are in dialogue and we are trying for an early solution which can be a win-win on both sides. So, without a serious impact on government finances, we will try to find a solution which can help our exporters also.’

The Department of Revenue has also asked its commerce counterpart to review the coverage of export incentive scheme MEIS, so that the fiscal benefits under this programme can be brought down to Rs 9,000 crore this fiscal as it has not yielded desired results. It has also requested the commerce department that MEIS incentives should be targeted and need calibration in a manner that it promotes exports instead of spreading incentives in a manner that does not yield the desired result.

The CNX Nifty traded in a range of 11,150.40 and 11,026.65 and there were 34 stocks advancing against 15 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Sun Pharma up by 5.46%, Cipla up by 5.11%, Grasim Industries up by 4.98%, JSW Steel up by 2.85% and UPL up by 2.84%. On the flip side, Eicher Motors down by 2.74%, Reliance Industries down by 1.84%, HDFC Bank down by 1.66%, Bajaj auto down by 1.61% and Kotak Mahindra Bank down by 1.43% were the top losers.

European markets were trading mostly in green; France’s CAC increased 8.79 points or 0.18% to 4,861.73 and Germany’s DAX increased 64.92 points or 0.52% to 12,444.57, while UK’s FTSE 100 decreased 2.74 points or 0.05% to 5,987.25.

Asian markets ended mostly lower on Friday after data showed the US economy contracted at annual rate of 32.9% in the second quarter, the deepest decline since the Great Depression. In a separate report, the US Labor Department data indicated that jobless claims increased 12,000 to a seasonally adjusted 1.434 million in the week ending July 25. US President Donald Trump exacerbated investors nervousness by floating the possibility of delaying the November US presidential election. Japanese shares ended down as the yen strengthened on dismal US economic data. Tokyo counted a record one-day high of 463 corona virus cases. Though, better-than-expected quarterly earnings results from tech giants as well as upbeat data from China and Japan helped ease worries about a global economic recovery and capped further loss. The manufacturing sector in China continued to expand in July, the National Bureau of Statistics said with a manufacturing PMI score of 51.1, up from 50.9 and beating expectations for a score of 50.7. The non-manufacturing PMI came in with a score of 54.2, matching forecasts and down from 54.4 in the previous month. While, Industrial output in Japan was up a seasonally adjusted 2.7 percent sequentially in June. That beat forecasts for a gain of 1.2 percent following the 8.9 percent decline in May.

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