Markets to get a soft start of the F&O expiry week

The Indian markets lost their way and ended lower by over a quarter percent in last session. Today, the start of the F&O expiry week is likely to be soft-to-cautious on weak global cues. However, traders may get some support with Reserve Bank of India Governor, Urjit Patel downplaying the risk of inflation and harping on the focus on growth. Patel reportedly said that the GST regime would not harden inflation and the growth objective will remain part of the newly constituted MPC's mandate. Traders will also be getting some support with Niti Aayog Vice-Chairman Arvind Panagariya’s statement that a good monsoon, reforms and timely decision making at the Centre will definitely push India’s growth beyond the 8 per cent mark in subsequent quarters of this fiscal. Also, the Goods and Services Tax (GST) Council on Friday reached a consensus on three crucial issues - the threshold for exemption, the draft compensation formula and the issue of dual control. Meanwhile, Commerce Minister Nirmala Sitharaman has announced a raft of measures, including setting up of agencies for aquaculture and fisheries in all coastal states and export incentives for marine products, under the Merchandise Exports from India Scheme (MEIS). The PSU oil marketing companies will be in action after the crude oil plunged in last session on reports that Saudi Arabia did not expect a decision in Algeria on production cut.

The US markets snapped the jubilant trend in last session with investor sentiment getting hit by a renewed slide in crude-oil prices. The Asian markets have made a weak start tailing last session decline in US markets and some of the indices are down by over half a percent, though oil rebounded following its steepest fall in two months, on hopes of prospects of major oil producers agreeing output curbs at talks this week.

Back home, Indian equity indices completed the week on a sluggish note as the benchmarks showcased an unenthusiastic performance on Friday and settled with moderate cuts of around a quarter percent. Marketmen looked to consolidate their position in the session after rocketing around a percent in the last session and they largely indulged in stock specific activities ahead of next week’s F&O expiry. Sentiments remained down-beat in local market as European stock markets got off to a gap down beginning and were trading with cuts of around half percent, while the Asian counterparts too settled on a vigilant note. Adding anxiety among market participants was a private report indicating that some of investment banks have started to cut exposure to Indian equities citing expensive valuations. The global investment banks acknowledged India to be a bright spot among emerging market peers, but the valuation looks expensive. If earnings fail to bounce back, chances of a steep correction will increase. The domestic brokerage houses are also maintaining cautious approach as there is no evidence of any economic recovery out there at the moment, especially on the capex side, while private investment is also not picking up. There is nothing to suggest that capex will return in next six months or in the next financial year. However, investors got some comfort with Minister of State for Finance Arjun Ram Meghwal’s statement that the new indirect tax regime is a major tool for improving ease of doing business and has also said that the government will be able to implement Goods and Services Tax (GST) from April 1, next year. On the agricultural front, India's kharif harvest is poised to jump 9% to 135 million tonnes, beating a six-year-old record. Finally, the BSE Sensex declined by 104.91 points or 0.36% to 28668.22, while the CNX Nifty dropped 35.90 points or 0.40% to 8,831.55.