Markets to make another soft start on weak global cues

04 Nov 2016 Evaluate

The Indian markets lost their tempo in the final hours and ended in red again, with Nifty slipping below 8500 mark. Traders even over looked the good services PMI amid global concerns. Today, the start is likely to be in red on feeble global cues but traders may get some respite with report that in a major breakthrough for rollout of the Goods and Services Tax regime from April 1 next year, the government finalized four-tier GST tax structure of 5, 12, 18 and 28 percent that aims to lower tax incidence on most goods and keep out essential items. Luxury items like high-end cars and demerit goods including tobacco, pan masala and aerated drinks, will be taxed at the highest rate and would also attract a cess in a way that the total incidence of tax remains at almost the current level. Chief Economic Advisor Arvind Subramanian has said that the GST Council’s decision to peg the tax rate on items of mass consumption at 5 per cent will bring down prices and soften inflation. Though, all the cigarette companies are likely to be under pressure. There will be some buzz in the coal sector stocks, as the Coal secretary Anil Swarup has said that the government was considering giving mines to private players for commercial mining but the demand situation was holding it back from taking a final call. There will be some buzz in steel stocks too, as the Finance Ministry has imposed provisional anti-dumping duty on import of hot rolled steel products (bars and rods) from China. This anti-dumping duty will be valid for a period of six months.

The US markets continued their slide in last session on concern over the Presidential election outcome amid lackluster economic data. The Asian markets have extended the somberness and most of the indices have made a weak start with Japanese market taking the lead despite the services sector in Japan swinging to expansion in October.

Back home, Indian benchmark indices extended the sorrow of closing in the red territory for the second consecutive session on Thursday as investors fretted over the rising chances that maverick tycoon Donald Trump could win the US presidency in next Tuesday's election. Trump’s provocative stand on key issues like global trade, immigration, outsourcing, internal security, globalization and trade barriers have caused a considerable amount of anxiety among the global business community. Further, the US Federal Reserve on Wednesday indicated a likely hike in interest rates in December due to improving economic conditions, too induced a prolonged spell of volatility in the local market. On the domestic front, sentiments were undermined by the repot that GST Council, which began 2-day deliberations today, is likely to shortly finalize a tax structure as Centre and states seeming to harden their positions with respect to the issues they disagree on. There is a raging debate on the Centre’s proposal for having multiple rates for GST. Market participants were also disappointed with the S&P Global Ratings’ decision to rule out an upgrade for India over the next two years even as it affirmed the stable outlook on the country’s ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings. The global rating agency has stuck to its rating, saying it would need to see more efforts to lower the country’s net general government debt level to below 60% of gross domestic product. However, investors got some comfort with the report indicating India’s Services sector activity gathered pace in October, driven by sharper increase in new business orders amid strong demand and improved market conditions. The Nikkei India Services Purchasing Managers' Index (PMI), which tracks services sector companies on a monthly basis, stood at 54.5 in October as against 52.0 in September. Some support also came with the report that India Inc is optimistic about its business prospects with a majority of firms saying current economic conditions are 'moderately to substantially better' compared to the last six months, even as cost and availability of credit remain a concern. The Overall Business Confidence Index (OBCI) rose to a six quarter high in the Business Confidence Survey conducted by FICCI, indicating that demand is gaining traction. The index value stood at 67.3 in the current round as against 62.8 in the previous poll. Finally, the BSE Sensex declined by 96.94 points or 0.35% to 27430.28, while the CNX Nifty dropped 29.05 points or 0.34% to 8,484.95.

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