Markets to make a gap-down start on feeble global cues

The Indian markets suffered sharp profit taking in the last session and are likely to extend the trend with a gap-down start on feeble cues amid geopolitical concerns. Traders will be eyeing the Index of Industrial Production (IIP) data to be released after the market hours. Marketmen will also be eyeing the buzz in political circle that finance ministry will shortly move a cabinet note on a multidimensional recast of the budget. The proposal involves merging the rail budget with the general budget and advancing its presentation in Parliament to January from February end. There will be some support with Finance Ministry notifying the provisions of the Constitution Act, 2016 that will allow setting up of the crucial Goods and Services Tax (GST) Council, which will decide on all key issues relating to the indirect tax levy, including the rates, and will come into effect from September 12. There will be some buzz in the PSU stocks, as the government has started its biggest disinvestment programme through asset sales by appointing merchant bankers to divest minority stakes held in listed and unlisted companies through the Specified Undertaking of the Unit Trust of India (SUUTI). The telecom stocks too are likely to remain in action on reports that telecom regulator Trai has decided to reject the demand of incumbent mobile operators such as Bharti Airtel, Vodafone and Idea Cellular for an increase in the fee that they charge from Reliance Jio to terminate its calls on their networks.

The US markets declined in last session, with S&P posting its worst day since June as investors nervousness increased following a nuclear test by North Korea and comments by Federal Reserve officials that lifted rate hike bets. The Asian markets have made a weak start with many of the indices trading lower by 1-2 percent in early deals, led by slump in commodities stock with questions being raised on benefits of loose monetary policy.

Back home, the local benchmarks witnessed a sharp fall on Friday as investors booked profits following reports of a nuclear test in North Korea amid uncertainty over the European Central Bank's future policy steps. European Central Bank at its policy meet on Thursday maintained a status quo on key rates and also surprised the market by not extending the deadline of its bond-purchases programme. On the domestic front, sentiments were undermined by the report that the country-wide monsoon deficit stood at 4% with northeastern and eastern states reporting 13% less rains from June 1 to September 7, 2016. India mostly remained dry during last week, with many areas receiving scanty rainfall. June witnessed a rain deficiency of 11%, while July had 7% of surplus rainfall. August again witnessed a dip of 9.7%. Anxiety among investors further increased the private report indicating that lower food prices likely cooled India’s inflation rate in August, but probably not by enough to give the central bank scope to ease monetary policy again anytime soon. Markets participants remained cautious ahead of IIP data due to be released later in the day. However, the downside remained capped with the President Pranab Mukherjee giving his assent to the landmark Goods and Services Tax (GST) Bill. Now the Centre will have to pass the Central GST and Integrated GST Bills, while the states will need to approve their respective GST legislations. The government targets to implement the GST system from 1 April, 2017. On the global front, Asian markets ended mostly lower on Friday as investors weighed the outlook for monetary policy in the US and Japan after the European Central Bank downplayed the need for more economic stimulus, while European shares posted their first back-to-back losses since mid-August. Back home, the local benchmarks got off to a gap down beginning following the hefty selling in Asian equities after investors largely remained influenced by gloomy global developments. Finally, the BSE Sensex declined by 248.03 points or 0.85% to 28797.25, while the CNX Nifty dropped 85.80 points or 0.96% to 8,866.70.