Markets to see some recovery after five days of decline

The Indian markets extended the bearish trend in last session and deposed another quarter a percent, giving up all the early gains. Today, the start is likely to be slightly in green on positive global cues. Markets will be showing some recovery after five days of lull and traders will be getting some encouragement with Finance Minister Arun Jaitley statement that the government would offer tax incentives to small businesses engaged in cashless transactions, as part of the government's fight against the cash economy. He said the move would enable businesses with annual turnover of Rs 2 crore to save up to 30 per cent in tax payments. There will be some cheer for the banking stocks, as the Reserve Bank of India has urged the Finance Minister Arun Jaitley to allow banks to get full tax deduction on the provisions made towards bad debts. Such a facility of full tax deduction will shore up banks, which face challenges from demonetisation and sluggish loan recoveries in the ongoing third quarter. The railways stocks too will be buzzing, as the Finance Minister indicated that the Railways must shift its focus from populism to performance and called for a transparent accounting system for Railways and outsourcing some of its non-core functions such as hospitality services.

The US markets extended the gains, despite a lack of major catalysts amid another quiet day on the U.S. economic front. With the upward move on the day, the Dow and the Nasdaq reached new record closing highs. The Asian markets have made a green start tailing the gains in the US markets and as oil extended gains leading the energy stocks higher.

Back home, Indian benchmarks indices extended the sorrow of closing in the red territory for the fifth consecutive session on Tuesday as investors shied away from taking any big bets on rising geopolitical concerns in Turkey, Germany and Switzerland. Sentiments took a hit after Global financial services major Nomura revised upwards India's current account deficit (CAD) forecast to 1.4% of GDP for the current fiscal from 0.4% earlier. According to Nomura, India's trade deficit widened to a 16-month high of $13 billion in November from $10.4 billion in October, as a result of a sharp slowdown in exports after demonetization and a pickup in imports, led by gold and higher commodity prices. For the fourth quarter (October-December) of 2016 Nomura expects a current account deficit of 2.5% of GDP (versus 0.9% earlier) and for the January-March period, it is likely to be around 2% of GDP. Trading sentiments weakened further on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 535.77 crore on December 19, 2016. The downside reamined capped with Finance Minister Arun Jaitley’s statement that Reserve Bank of India was fully prepared to deal with currency shortages post demonetisation and has enough currency in its chests to last 'far beyond' December 30, 2016. Some support also came with NITI Aayog member Ramesh Chand’s statement that despite the impact of demonetisation, growth in agriculture for the current year will still be 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, Aviation stocks came under pressure after the report that India’s Airlines industry may have to bear an additional tax burden of up to Rs 15,000 crore annually once the Goods and Services Tax (GST) is implemented. The additional tax burden may push airlines, most of which have turned profitable, into losses again, coming as it does at a time when global fuel prices are flaring up. Finally, the BSE Sensex declined by 66.72 points or 0.25% to 26307, while the CNX Nifty dropped 21.95 points or 0.27% to 8,082.40.