Markets to continue the somber mood with a mildly weak start

The Indian markets made another lower closing after a lackluster trade in the last session. Today, the start is likely to be again mildly in red on mixed global cues. However, markets may see some recovery in the latter part of trade taking some support from NITI Aayog member Ramesh Chand’s statement that despite the impact of demonetisation, growth in agriculture for the current year will be still above 5 per cent, though he pointed that the prevailing cash crunch has hit the growers of perishables more compared to those who grow bulk crops such as paddy and cotton. Meanwhile, to promote a “less cash” society, the Finance Ministry has announced that it would provide tax incentives to small traders accepting payments through digital mode. The Ministry said the required legislative amendment will be carried out in the Finance Bill 2017 which will be tabled with the Union Budget 2017-18. Market will also be getting some encouragement with Chairman of the Insolvency and Bankruptcy Board of India, MS Sahoo’s statement that the Insolvency and Bankruptcy Code enacted by the government recently is likely to improve ‘ease of doing business’ rankings and provide a safe exit for businesses that have failed. The Tata group stocks will keep buzzing with Cyrus Mistry, the sacked chairman of Tata Sons announcing that he was resigning from the board of all listed Tata entities.

The US markets managed a positive close but were well off the day’s high, with some traders away from their desks ahead of the upcoming holidays. The Asian markets have made a mixed start as geopolitical concerns intensified after the assassination of Russia’s ambassador to Turkey and violent incidents in Germany and Switzerland. The Japanese market was marginally in green with weakness in yen against dollar.

Back home, Indian market commenced the fresh week on a depressing note as the benchmark indices extended previous week’s sell-off and sank by close to half a percentage points during the session. Sentiments took a hit after the industry body ASSOCHAM in its latest report 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. Apart from continued outflows by foreign funds, a weak trend in Asia and concerns of an expected jump in US interest rates next year also weighed on the sentiment. Foreign investors have pulled out more than Rs 19,500 crore from the capital market this month so far. The FPI outflows took place following a withdrawal of over Rs 49,700 crore on net basis from the capital market (equity and debt) in last two months (October-November).  However, investors got some comfort 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. Some support also came with Union Transport Minister Nitin Gadkari’s statement that India’s infrastructure sector has the potential of boosting GDP growth up to 3% and efforts are being put in by the centre to achieve this objective. Meanwhile, shares of oil marketing companies (OMCs) settled higher in otherwise weak market after these companies raised petrol and diesel prices with effect from midnight of 16th / 17th December 2016. This week, the market is likely to be rangebound as the holiday spirit is expected to keep the market muted on account of less volume on the FII counter. On the global front, Asian markets ended the session on dull note on Monday as investors trimmed their equity holdings following hawkish comments from the US Federal Reserve on interest rate hikes last week. Back home, finally, the BSE Sensex declined by 114.86 points or 0.43% to 26374.70, while the CNX Nifty dropped 35.10 points or 0.43% to 8,104.35.