Markets to make a flat-to-cautious start of the day

The Indian markets continued the weak trend and ended with over a quarter percent of loss in last session in the aftermath of the US Fed’s interest hike decision and hint of an aggressive pattern of rate increases next year. Today, the start is likely to be flat to cautious and the commodity stocks will be under pressure tailing their global counterparts. Traders will also be reacting to the report of widening trade deficit. India's trade deficit widened to $13 billion in November from a provisional $10.16 billion last month, it’s the highest since $13.08 billion in July 2015, and sharply wider than the $10.41 billion gap in October. Though, for the third consecutive month, exports recorded a positive growth of 2.29 per cent year-on-year to $20 billion, but imports grew at a faster pace of 10.4 percent to $33.02 billion. Traders however, will be getting some support with the statement of chief economic adviser at the ministry of finance Arvind Subramanian that India is as better equipped than other emerging markets to weather the impact of higher US interest rates because of its stronger economic growth and record high foreign exchange reserves of more than $300 billion. Meanwhile, Finance Minister Arun Jaitley has said that the government and the Reserve Bank are taking measures to bring down the digital transaction cost with an aim to move towards a less-cash economy.

The US markets managed a positive close but were off the highs of the day in last session, as traders continued to digest the Federal Reserve's decision to raise interest rates by a quarter point on Wednesday. The Asian markets have made mostly a positive start, though a stronger U.S. dollar weighed on commodity prices and dragged down resources stocks. The dollar was trading near an almost 14-year high versus the euro as the Federal Reserve’s more hawkish outlook invigorated its post-election rally.

Back home, Indian stock markets wrapped Thursday’s trading session on a distressing note as investors tuned jittery after the US Federal Reserve raised interest rates by a quarter point on late Wednesday and signalled a faster pace of increases in 2017 and 2018, increasing fears that higher interest rates in US would trigger foreign investment outflows from emerging markets including India towards the US. On the domestic front, sentiments were undermined with industry body CII’s report that India's economic growth will see a 'significant fall' in the second half of the current fiscal on account of cash crunch following demonetisation. As far as corporate earnings are concerned, the consumer goods sector has seen sales drop by 20 per cent in the last month. Besides, depreciation in rupee value against dollar, also weighed on the sentiments. Indian rupee tumbled by 42 paise to 67.85 against the US dollar due to appreciation of the American currency globally. However, investors got some comfort with Chief Economic Advisor Arvind Subramanian’s word that the Indian economy is ‘well cushioned’ to absorb the impact of US Federal Reserve's rate hike. According to Subramanian, India is seen as better equipped than its other emerging market peers to weather the impact of higher U.S. interest rates because of its stronger economic growth and record high foreign exchange reserves of more than $300 billion. Some support also came with private report stating that the Reserve Bank is expected to meet its inflation target 'comfortably' as CPI inflation is likely to remain well below 5 per cent over the first half of 2017. Meanwhile, liquor stocks such as Globus Spirits, Pincon Spirit, Radico Khaitan and United Spirits declined after the Supreme Court ordered closure of liquor shops along the national and state highways. Finally, the BSE Sensex declined by 83.77 points or 0.31% to 26519.07, while the CNX Nifty dropped 28.85 points or 0.35% to 8,153.60.