Markets to make a cautious start, may strengthen in latter trade

The Indian markets extended their consolidation mood in last session and once again ended marginally in red with Nifty slipping below the crucial 8100 level. Today, the start is likely to remain cautious amid mixed global cues and worries of US interest rate hike, but some strength can be seen later in the day. Traders will be getting some support with NITI Aayog Vice-Chairman Arvind Panagariya’s statement that India can become a $10 trillion economy in the next 15 years, like China did in last one and a half decade. He said there is much scope for India to benefit from Chinese experience in the manufacturing sector and make the country into a robust & steady economy. Also, a private report has said that India’s current account deficit is expected to stay comfortable at $ 10.1 billion in this financial year, largely on account of likely demand moderation post the demonetisation move. Meanwhile, in efforts to attract more overseas investments, RBI has allowed foreign portfolio investors (FPIs) to put their money in unlisted corporate debt securities as well as securitised debt instruments. There will be some important earnings announcements to keep the markets buzzing.

The US markets made a modestly higher in last session, with major averages finishing the session near their best levels of the day, following the release of a batch of largely upbeat U.S. economic data, including a report that housing starts jumped to a nine-year high in October. The Asian markets have made a mixed start after Federal Reserve Chair Janet Yellen signaled an interest-rate hike could be imminent. The Japanese market was trading higher as the yen weakened against the dollar.

Back home, Indian stock markets prolonged the lull for second straight day and finished the session on a dull note, marginally below the neutral line as investors at large remained reluctant to build on long positions, keeping an eye on Parliament’s winter session where the government is unlikely to bring three bills related to GST in the coming days. Both Houses of Parliament had a rocky start to the winter session as the government and the Opposition again locked horns over a move to scrap two high-value banknotes that has triggered chaos and confusion across the country. Opposition parties attacked the Centre for the move - aimed at stamping out illegal cash - and said the measure has hit the poor and the marginalized. Negative sentiment and selling pressure have impacted the market during the last 4-5 trading days as companies struggle to gauge the effects of the move on the spending in various sectors of the economy. The severe cash crunch has reduced the spending power of a majority of Indian population, impacting demand-led and consumption stocks in the market. Besides, continued outflow of foreign funds, coupled with negative global cues, too weigh on the sentiment. Foreign Institutional Investors (FIIs) and foreign portfolio investors (FPIs) have sold equity shares worth over $1 billion in the past five trading days. However, investors got some comfort with Moody’s Investors Service affirming India’s sovereign rating at ‘Baa3’ with a positive outlook, saying it expects policymakers to continue reforms to achieve balanced growth and reduce the government's debt load. Moody's further said that India's policy makers have taken important steps to strengthen the country's institutions. Meanwhile, IT stocks continued to witness selling pressure for the second straight sessions after IT industry body Nasscom cut growth guidance for the industry to 8-10 percent in constant currency terms from 10-12 percent. Further, jewellery showed some fine recovery in the last hours of trade as market participants lapped up beaten down but fundamentally strong stocks in the segment. Finally, the BSE Sensex declined 71.07 points or 0.27% to 26227.62, while the CNX Nifty dropped 31.65 points or 0.39% to 8,079.95.