Markets to rebound with a positive start on firm global cues

The Indian markets suffered yet another setback in last session with major benchmarks deposing over a percent, the broader markets performed even worse on worries that demonetization will drag the economic growth lower. Today, the start is likely to be in green and some recovery can be seen on positive global cues. Though, traders will still be cautious over concern of India's demonetisation move estimated to pull down gross domestic product growth this financial year from last year's 7.6 per cent. The domestic rating agency Icra has forecast a 40 bps dip in growth rates to 7.2 per cent in the second quarter of the current fiscal, citing debilitating impact of the demonetisation drive on the economy. Meanwhile, exporters in a meeting with Minister for Commerce and Industry have expressed concern over a possible fall in output over the past week due to the government’s demonetisation drive as some have been forced to stop production or reduce capacity due to shortage of cash. There will be some buzz in the aviation sector, with report that domestic airlines carried 86.72 lakh passengers during October this year, registering a growth of 23.18 per cent over the 70.39 lakh passengers flown during the same period in the previous year. There will be lots of important result announcements too, to keep the markets in action.

The US markets surged in last session with major averages ending the session at new record closing highs, reacting to a sharp increase by the price of crude oil. News on the merger-and-acquisition front also generated some buying interest. The Asian markets have made an all green start tailing the gains in the US markets, Japanese markets too has rebounded as markets digested a tsunami warning in the Fukushima region.

Back home, Indian equity benchmarks started the new week on a disturbing note as they went on to extend the declining streak for the third successive session as market participants resorted to hefty across the board profit taking. The frontline indices shaved off about one and half percent and breached 25,800 (Sensex) and 7,950 (Nifty) levels on the downside. The big selloff in the local market can be attributed to a couple of factors, such as the political situation which seems to be deteriorating and puts a question mark on GST if this Parliament session gets into a logjam. The second part is the impact of demonetisation on the economy. A private report has stated that India's economic growth is expected to fall by up to 1 percentage points over the next 12 months in the wake of demonetisation, while longer-term gains will depend on follow-up reforms. The recent selling by the foreign portfolio investors (FPIs) of Indian stocks also weighed on sentiment. Foreign investors have pulled out close to $ 3 billion from the Indian capital market this month so far on lingering concerns over the government’s demonetisation decision and fears of a rate hike by the US Federal Reserve. According to data, net withdrawal by FPIs from equities stood at Rs. 9,841 crore during November 1-18, while the same from the debt market was Rs 9,720 crore during the period under review, translating into a total outflow of Rs 19,561 crore ($ 2.89 billion). Adding anxiety among market participants, rupee was hovered around its Brexit lows to 68.23/$. It hit its lowest level since June 1 against dollar as sentiment turned bearish on combination of growing US rate hike expectations and stunning dollar run. On the global front, Asian equity markets ended mostly in green on Monday, while European stocks moved mostly lower in cautious trade. Back home, finally, the BSE Sensex declined 385.10 points or 1.47% to 25765.14, while the CNX Nifty dropped 145 points or 1.80% to 7,929.10.