Markets to make a cautious start of the F&O expiry session

The Indian markets despite some choppiness managed another positive close in last session; short covering supported the markets to keep the momentum going. Today, the start of the F&O series expiry day is likely to be a bit cautious and the trade will turn volatile with the progress of the day. Traders will be concerned with the minutes of the US Fed’s November meeting showing that the US central bank is poised to raise rates in December. On the domestic front too, the Goods and Services Tax (GST) Council meeting, scheduled for Friday has been cancelled and the Council will now meet on December 2-3 to deliberate on pending issues. The government is looking to introduce three draft Bills - central GST (CGST), integrated GST (IGST) and compensation law - in the ongoing winter session of the Parliament that ends on December 16. Meanwhile, Commerce and Industry Minister Nirmala Sitharaman has said that economic output in the current quarter may get affected, with the government’s demonetisation drive temporarily hitting commercial activities in some sectors. Traders however can get some support with Niti Aayog CEO Amitabh Kant’s statement, backing the government's decision to demonetise higher-value currency notes that the country is moving towards a totally digitised payment system that will accrue 'huge gains' in the long-term for the economy.

The US markets made a mixed closing in last session, while the Dow and the S&P 500 reached new record closing highs, the tech-heavy Nasdaq ended the day in the red, as traders seemed taking a breather following the upward move seen over the past couple weeks. The Asian markets too have made a mixed start with some indices in the region suffering cuts of over half a percent. Though, the Japanese market after a day of break was moving higher as the dollar rose to near a more than seven-month high against the yen.

Back home, Indian benchmarks carried forward their northbound journey for yet another session on Wednesday, due to short-covering by investors ahead of November derivatives expiry and a firm global trend. Sentiments remained optimistic with the private report indicating that a moderation in aggregate food prices will lower inflation momentum in November and the CPI inflation is expected to moderate to around 4 percent in November from 4.2 percent in October. Adding optimism among Market participants, Piyush Goyal, minister for power, coal, renewable energy and mines said demonetisation will increase India’s tax base and prepare the ground for less taxation, lower inflation and a fall in interest rates. Some support also came with Agriculture Minister Radha Mohan Singh’s assurance that sowing of rabi crops like wheat, pulses and oilseeds has not been affected due to banning of old Rs 500 and Rs 1,000 notes. Highlighting various steps taken to ease cash flow to farmers, the minister said farmers are allowed to buy seeds with old Rs 500 notes at government outlets as well as from agri varsities. He also said sowing area of wheat, pulses and oilseeds has been higher till November 18 of this rabi season compared with the year-ago period. However, several investors adopted cautious approach, while entering into market on rising pessimism over the report that government has assessed the impact of demonetisation that is likely to bring the gross domestic product (GDP) growth to 5.5% in the third quarter of financial year 2016-17, a steep drop from 7.1 per cent in the first quarter. Also, rupee was trading at fresh nine month low.  Meanwhile, the GST council meeting on Friday has been cancelled. This is the second time in the month of November that the GST council meeting had to be cancelled. The meeting was initially scheduled for 9-10 November, and was later postponed to 24-25 November. Furthermore, Lok Sabha was on Wednesday disrupted for the fourth consecutive day with Opposition leaders demanding discussion on demonetisation with the presence of Modi. Finally, the BSE Sensex gained 67.34 points or 0.26% to 26028.12, while the CNX Nifty rose 31 points or 0.39% to 8,033.30.