Markets to extend the somberness to the new week

The Indian markets after a volatile day of trade ended modestly in red in the last session. Today, the start of the new week is likely to remain somber and the markets will be extending the weakness amid soft global cues. Also, the industry body Assocham in its latest report has said that prospects of interest rate cut in near future may be bleak due to factors like continuous pressure on rupee against dollar, firming of the US interest rates and hardening of crude oil prices. Though, traders will be getting some encouragement with Finance Minister Arun Jaitley’s statement that infrastructure investment needs a booster and his next Budget in February will focus on encouraging more public as well as private spending to boost economic growth. The Finance Minister said there is a long-term potential of more resources getting into the system and that is going to be the top priority. Meanwhile, NITI Aayog CEO, Amitabh Kant has said that the country needs innovative policies to enable disruption and enhance per capita income. He added that need to ease rules and regulations, and even scrap some in bulk. States are growing rapidly; they also need to adopt ease of rules and there should be healthy competition among States. There will be some buzz in the PSU oil marketing companies as the international Crude oil prices rose edged closer to new 17-month highs in last session, while the local companies hiked the petrol prices by Rs 2.21 per litre and diesel by Rs 1.79 a litre in line with global trends.

The US markets ended modestly in red in the last session, giving up the early gains, partly due to geopolitical concerns following reports that a Chinese Navy warship seized an underwater drone belonging to a U.S. oceanographic vessel in the South China Sea. The Asian markets have made mostly a lower start with the heightened geopolitical tensions. Japanese market was down, as the yen led gains among major currencies.

Back home, Indian equity benchmarks prolonged the lull for third straight day and completed the session on a dull note, marginally below the neutral line as market participants at large remained reluctant to build on long positions amid lackluster trading on European and Asian bourses. The session largely remained characterized by choppiness as the aimless indices moved slowly and crept towards the previous closing levels after the early decline. Sentiments remained down-beat for most part of the session on the report that India's trade deficit widened to $13 billion in November, the highest since July 2015 and sharply wider than the $10.41 billion gap in October, as imports, including purchases of gold, outpaced exports of goods. Oil imports rose 5.9% to US$ 6.84 billion, while the non-oil imports gained 11.7% to US$ 26.18 billion in November 2016 over November 2015. 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. Meanwhile, Indian market looks more vulnerable than other emerging markets due to the ongoing demonetisation drive and its impact on corporate performances. According to industry body CII, India’s economic growth will see a ‘significant fall’ in the second half of the current fiscal on account of cash crunch following demonetisation.  However, losses remained capped with the report that more than 1,700 new foreign portfolio investors (FPIs) have registered with capital markets watchdog SEBI in the first seven months of the current fiscal, a sign of their willingness to be a part of India’s growth story in the long term. FPIs consider India as a preferred and stable market, given its macro-economic stability, long-term growth prospects and ongoing economic and social reforms. Some support also came with NITI Aayog CEO Amitabh Kant stated that cash shortages following the demonetisation of high value currency notes will end by mid-January. Finally, the BSE Sensex declined by 29.51 points or 0.11% to 26489.56, while the CNX Nifty dropped 14.15 points or 0.17% to 8,139.45.