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A rally on the cards

13-May-20    07:55

Local stocks are expected to see strong gains today boosted by Prime Minister Narendra Modi's announcement of a fiscal stimulus package of Rs 20 lakh crore. Trading of Nifty 50 index futures on the Singapore stock exchange indicates that the Nifty could jump 210 points at the opening bell. Global cues are negative. Markets will react to IIP and retail inflation data released after market hours yesterday. Maruti Suzuki and Kotak Mahindra Bank will announce their results today, 13 May 2020.

Prime Minister Narendra Modi in his address to the nation on Tuesday (12 May) announced a special economic relief package in light of the ongoing situation due to the COVID-19 outbreak. He said the economic measures earlier announced by the government to tackle the COVID-19 pandemic, steps taken by the Reserve Bank of India (RBI), and this latest package will come up to a total of Rs 20 lakh crore, nearly 10% of India's gross domestic product (GDP). The package will focus on land, labour, liquidity and laws.

PM Modi also said Lockdown 4.0 will be a new one, with new rules. It will be implemented based on suggestions from the states and details of the same will be announced before May 18.

On the macro front, India's industrial output contracted to 16.7% in March against a growth of 4.5% in February, as per the Index of Industrial Production (IIP) data released by the government on May 12. The manufacturing sector contracted 20.6% in March, against a growth of 3.2% a month ago. Mining showed no movement in March while electricity production contracted 6.8% against a growth of 8.1% in February.

India's retail inflation rate in April eased to 5.84%, according to data released by the Ministry of Statistics and Programme Implementation on May 12. Retail inflation was at 5.91% in March. Food prices remained unchanged at 8.76% in April.

Overseas, Asian stocks were trading lower amid risks of new infections as economies reopen. Developments on the coronavirus front likely continued to weigh on investor sentiment.

In Asia, where the coronavirus first hit, several countries including China and South Korea have experienced an uptick in cases after restrictions were eased.

In US, stocks dropped on Tuesday as investors took profits following a warning from the top US infectious disease expert that premature moves to reopen the nation's economy could lead to novel coronavirus outbreaks and set back economic recovery.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said Tuesday a vaccine will be essential in stopping the coronavirus spread, but warned it will be a while before a usable one is available. He also cautioned that the U.S. could risk additional outbreaks if states start to reopen too quickly.

Back home, the market ended a highly volatile session with modest losses on Tuesday. Gains in auto stocks eclipsed weakness in banks shares. A steep correction in index heavyweight Reliance Industries (RIL) put pressure on bourses. The barometer S&P BSE Sensex fell 190.10 points or 0.60% at 31,371.12. The Nifty 50 index was down 42.65 points or 0.46% at 9,196.55.

Foreign portfolio investors (FPIs) sold shares worth Rs 1,662.03 crore, while domestic institutional investors (DIIs), were also net sellers to the tune of Rs 364.00 crore in the Indian equity market on 12 May, provisional data showed.

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