Markets to see a bounce back; start the new series on a positive note

The Indian markets changed the course in the final hours of last session and ended with cut of another over half a percent, and the November series saw steep decline of over seven percent for the benchmark indices. Today, the start of the new series is likely to be in green and some good bounce back can be seen in early deals on positive regional cues. Traders will also be getting some support with Finance Minister Arun Jaitley’s statement that the government's demonetisation move is going to have 'a positive impact on the economy, including GDP'. Jaitley said there will be a positive impact 'because a lot of money that operates in the shadowy economy will now become part of the banking structure' and banks will have a lot more money to support the economy. Meanwhile, the global rating agency Moody’s has said that India's decision to scrap some high-value notes will significantly disrupt economic activity, result in weaker consumption and economic growth in the immediate term but is expected to boost tax revenues and trigger faster fiscal consolidation in the long run. There will be some buzz in the export oriented stocks, with Commerce and Industry Minister Nirmala Sitharaman stating that the finance and railways ministries are working on ways to cut logistics costs which make exports uncompetitive. The Minister said that she has discussed the increasing logistics costs with the Finance Minister. There will be some important result announcements too, to keep the markets buzzing.

The US markets remained closed in last session unable to give any cues to other global markets. The Asian markets though have made mostly a positive start, with Japanese market extending its rally with the dollar heading toward its steepest three-week climb against the yen since 1995.

Back home, the November series futures and options contract expiry day turned out to be a shocker for the Indian markets as benchmarks, after showing some recovery in early afternoon session, crashed like house of card in the last leg of trade, with investors offloading their positions an hour before the F&O contract expiry. Sentiments remained dismal from start of the session as the upbeat US economic data released on Wednesday strengthened the prospects for higher US interest rates. The minutes from the US Federal Reserve’s November policy meet, showed Fed policymakers appeared confident on the eve of the US Presidential election to hike interest rates soon. On the domestic front, sentiments got hit after the rupee crashed to nearly 39-month low of 68.84, plummeting by another 28 paise against the US dollar on Thursday amid sustained foreign fund outflows and the greenback's surge in overseas markets. Foreign Institutional Investors (FIIs) have withdrawn over Rs 3,700 crore from equity markets this week. Also, the much-awaited Goods and Services Tax (GST) Council meeting, slated for Friday, was postponed by a week that too adversely impacted the sentiments. Adding anxiety among market participants, Commerce and Industry Minister Nirmala Sitharaman said that economic output in the current quarter may get affected, with the government’s demonetization drive temporarily hitting commercial activities in some sectors.  Goldman Sachs has forecasted a deceleration in India’s GDP growth to 6.8% this fiscal, down from 7.6% last financial year, due to demonetisation of Rs 500 and Rs 1000 currency notes. Meanwhile, Consumer products companies such as Britannia, Parle Products, Dabur and Emami have started cutting their production as sales have slowed down significantly in the aftermath of the demonetisation drive. Dabur CEO Sunil Duggal said sales were down 20% over last week, which has resulted in the supply chain automatically calibrating production. Emami Director Harsha V Agarwal, too, said the company has started making adjustments to align production with demand. Finally, the BSE Sensex declined by 191.64 points or 0.74% to 25860.17, while the CNX Nifty dropped 67.80 points or 0.84% to 7,965.50.