Indian equity benchmark indices pared most of their early losses to settle with minor cut on Wednesday, as investors stayed cautious ahead of the CPI inflation data for July which will be released later in the day. Key indices made gap-down opening, following lackluster macroeconomic data and concerns over rising coronavirus cases. Government data showed India's industrial production declined by 16.6 per cent in June, on account of disruption in normal business activity following the outbreak of coronavirus pandemic. Some cautiousness also prevailed in the markets with a private report that the MSMEs will take at least 7-8 months to recover from the impact of COVID-19 pandemic, and the recovery rate of an enterprise will depend on factors like its rate of digitisation and the sector in which it is operating. Traders also reacted negatively to Fitch Ratings’ statement that the Reserve Bank's scheme to allow lenders to recast loans will extend uncertainty over the banking sector's asset quality. According to Fitch, the scheme could open a window for banks to build capital buffers while putting off full recognition of COVID-19 pandemic's impact on loan portfolios, but is reminiscent of a strategy adopted over 2010-2016 that delayed and exacerbated problems for banks.
On the global front, Asian markets ended mostly in green on Wednesday, as Russia's announcement that its coronavirus vaccine has been approved was offset by worries about political holdup in Washington over coronavirus relief. European markets were trading mostly in green, after data showed factory output in the euro zone grew Market Turnover & FII Derivative Data for the second straight month in June, following a marked relaxation of the coronavirus containment measures.