Markets to make a flat-to-cautious start CPI inflation data eyed

The Indian markets suffered sharp drop in last session and the major benchmarks deposed around a percent. Today, the start is once again going to be cautious one amid weak regional cues and markets may remain concerned with Fed’s widely expected interest rates hike . On domestic front, with the persisting differences between the Centre and States over the draft GST Bill, it has started becoming likely that the Goods and Service Tax may not be rolled out from April 1. Also, a private report has stated that PE/VC investments in India declined both in terms of value and volume in November. Traders will be eyeing the Consumer Price Index (CPI), data which is expected to cool down for the month of November as the data accommodates the impact of the government's decision to demonetise high value currency notes that month. The all-India general CPI inflation had dropped to 4.2 per cent in October from 4.39 per cent in the previous month. Markets may get some support with Central Board of Direct Taxes (CBDT) clarification that an increase in turnover of a business owing to its accepting digital means of payment will not trigger reopening of cases of past years. Meanwhile, leading industrialist Adi Godrej has stated that demonetisation may have had “considerable negative effect” in the first few days but the situation now has improved and it will have a positive impact on the economy. The PSU oil marketing companies will continue to remain under pressure, as from midnight tonight, all petrol and diesel purchased using digital payment will get a discount of 0.75 percent and will be borne by state-owned oil marketing companies.

The US markets made a mixed closing in last session, though the Dow still managed to reach a new record closing high. Trading sentiments remained cautious ahead of the Federal Reserve's monetary policy announcement on Wednesday. The Asian markets have made mostly a soft start, with Chinese market extending the worst losses in six months, even as China’s statistics bureau reported stronger-than-expected industrial output and retail sales.

Back home, Monday’s session turned out to be a daunting day of trade for Indian equity benchmarks, where frontline gauges tumbled below their crucial 26,600 (Sensex) and 8,200 (Nifty) levels. After a gap down opening, market never looked confident throughout the session and ended near the intraday low levels, as sentiments remained dampened with Industrial production shrinking an annual 1.9% in October, worsening from a 0.7% rise in the previous month and 9.8 per cent growth in the year-ago month. Industrial production has contracted in four out of seven months so far this fiscal. In the April-October period, production declined 0.3 per cent compared with 4.8 per cent growth last year. Weak economic data coupled with the fear of rise in inflation with the surge in crude prices after OPEC and non-OPEC producers reached a deal on Saturday, too weighed down the sentiments. Traders also remained on sidelines ahead of domestic trade deficit data, November CPI inflation and WPI inflation to be announced later in the week, while globally Fed rate decision is awaited. Sentiments also remained dampened with the Centre and States failing to approve the GST laws on Sunday and agreeing to meet on December 22 and 23 to hammer out a consensus, dashing hopes that the crucial bills would be introduced in the ongoing winter session of Parliament and making it tough to meet the April 1 rollout date across the country. Markets participants shrugged off robust growth in November indirect tax collection. Net indirect tax collections grew 23.1 per cent in November from a year ago. Overall, net indirect tax mop-up was up 26.2 per cent in April-November from a year ago, while net direct tax increased 15.1 per cent over this period. Total direct and indirect tax collections at the end of November stood at Rs 9.64 lakh crore, nearly 60 per cent of the budget target of Rs 16.26 lakh crore for FY17. Sentiment was also weakened by continued uncertainty about the impact on the economy and corporate profits from the cash shortage sparked by the country's demonetisation drive. On the sectoral front, information technology stocks remained under pressure by tough talk on visas by US president Donald Trump. Finally, the BSE Sensex declined 231.94 points or 0.87% to 26,515.24, while the CNX Nifty was down by 90.95 points or 1.10% to 8,170.80.