Markets to get a flat-to-cautious start on mixed regional cues

The Indian markets went for a humungous rally in last session and major benchmarks bounced back in style to post gains of over one and half percent. Today, the start is likely to be in green but cautiousness may prevail and some consolidation too can be expected amid mixed Asian cues. Traders may get some support with CBEC Chairman Najib Shah’s statement that the GST Council may in future decide to reduce the tax slabs under the Goods and Services Tax regime after analysing the revenue garnered and the compensation payouts to states. He said that any change in tax slab is possible after assessing the revenues and the effect of exemptions and deductions given in the new tax regime and analysing it with the expenditure. Meanwhile, in a move to promote cashless transaction or e-payment, the government announced discount on an array of services including discount on petrol and diesel. The Prime Minister too has urged the people to embrace increased cashless payments and integrate latest technology in their economic transactions. The auto stocks will be under pressure on report that demonetization has hit the auto sector hard, with sales in November being impacted across all segments.  Passenger vehicle sales in the country grew by 1.82 per cent in November, the lowest rate since February this year, on the other hand sales of two-wheelers fell by almost 6 per cent, and commercial vehicle sales were down close to 12 per cent. There will be some buzz in power stocks too, after the Supreme Court set aside an electricity tribunal’s order that allowed it to recover Rs 1,050-crore dues from seven state utilities and Tata Power Distribution Company.

The US markets extended their surge in last session, with all the three major averages reaching new record closing highs on the heels of the European Central Bank's highly anticipated monetary policy announcement. The ECB said it decided to continue its asset purchases at the current monthly pace of 80 billion euros until the end of March of 2017. The Asian markets have made a mixed start, with some indices trading in red on European Central Bank’s pledge to cut bond buying, though the Japanese market was higher on weakness in yen.

Indian equity indices staged a stunning performance on Thursday by strongly rallying over one and half percent, on the back of widespread buying by participants tracking firm global cue in anticipation of the European Central Bank extending stimulus. Local sentiments also got buttressed by Finance Minister Arun Jaitley’s statement that demonetisation will boost growth in long run. The Finance Minister said the country will now have a cleaner economy, cleaner ethics and better GDP, he added that the economy, in the long term, is looking for a major change and policy makers now have a vision. Also, appreciation in rupee value against the dollar added to the optimistic sentiments. Indian rupee gained 19 paise to 67.44 against the dollar on Thursday on sustained selling of the US currency by exporters and banks amid foreign fund inflows. The foreign institutional investors which resorted to selling after Trump's win also reversed their trend in past few sessions. In last two trading sessions the foreign institutional investors bought shares worth Rs 356 crore. Investors got some confidence after Reserve Bank of India’s (RBI) deputy governor enlightened that the banking sector’s health is improving as bad loan accumulation has slowed and provision coverage has improved than in the previous quarters. The formation of incremental NPA (Non Performing Assets) has decelerated, the provision coverage ratio at the system level has slightly improved and compared to the last year, in this half year, the recoveries have been better and write-offs have reduced to some extent. Some support also came with S&P Global Ratings’ statement that India with a large domestic economy will be less affected by the changes in growth and monetary policy in the new set-up under Donald Trump administration. Finally, the BSE Sensex gained 457.41 points or 1.74% to 26694.28, while the CNX Nifty rose 144.80 points or 1.79 % to 8,246.85.