Markets to continue the weak trend on sluggish global cues

The Indian markets continued their slide in the last session with Nifty making its longest losing streak in over a year and the Sensex slipped below the crucial psychological levels of 26000 on sustained capital outflow. Today, the last trading day before Christmas is not likely to be much different and the markets tailing the weak global cues will make a soft-to-cautious start. Traders may however get some support with thaw appearing on the GST issue, and the prospects of early roll out of goods and services tax (GST) brightening with the states and the Centre making progress on a crucial legislation, amid indications that the states may get concessions to tide over possible demonetisation-related revenue loss. The draft Bills for integrated GST and compensation as well as administrative control over businesses will be taken up for discussion on today. Meanwhile, NITI Ayog vice-chairman Aravind Panagariya has termed Prime Minister Narendra Modi's demonetisation scheme as a “frontal attack” on black money and said that more such actions are in store to curb corruption. There will be some buzz in the auto sector on reports that the Centre is looking at introducing a law where one may not be allowed to register new car or any other vehicle unless he produce proof that he has adequate parking space for it.

The US markets extended their weakness for the second straight day and ended modestly lower in last session with trading activity remaining relatively light ahead of the holiday weekend. Traders even overlooked the report showing a sharp pullback in durable goods orders in the month of November. The Asian markets have made mostly a lower start following the decline in the overnight US markets, flurry of positive data about the American economy bolstered rate hike case.

Back home, extending their recent downtrend, Indian equity benchmark indices witnessed further drubbing on Thursday as the country’s cash crunch issue continued to weigh on corporate earnings expectations for the December quarter. The frontline gauges failed to showcase any kind of resilience through the session and kept drifting to lower levels, breaking one technical level after another to eventually settle below the psychological 8,000 (Nifty) and 26,000 (Sensex) levels. Sentiments remained bearish on sustained foreign fund outflows and a weak trend at Asian and European markets. Foreign portfolio investors (FPIs) have already pulled out of equities worth nearly $4 billion (over Rs 25,000 crore) so far in the December quarter, the worst since September 2015, amid uncertainty over US presidential election and prospects of hawkish US Federal Reserve’s policies.  Also, investments in domestic capital markets through participatory notes (P-Notes) plunged to its lowest level in nearly three years in November 2016. According to the data available with Sebi, the total value of P-Notes investment in Indian markets -- equity, debt and derivatives -- fell to Rs 1.79 lakh crore in November-end, from Rs 1,99,987 crore at the end of October 2016.  Adding the pessimism among investors, Chief Executive Officer of NITI Aayog Amitabh Kant said that just one per cent of India's more than 1.25 billion population pays Income Tax and the country cannot afford as high as 95 percent of its economy making cash transactions. Furthermore, traders remained cautious with Prime Minister Narendra Modi’s top economic adviser Bibek Debroy’s statement that the negative shock from demonetisation will last until the end of March, though he also said that improved growth next year should fully compensate for the loss. Also, the minutes of last rate-setting meeting of the Reserve Bank of India’s monetary policy committee (MPC) showed that it shifted its focus towards inflation, while playing down concern about economic growth. Moreover, the broader markets too ended on a daunting note with over one percent losses, underperforming their larger peers by quite a margin. Finally, the BSE Sensex declined by 262.78 points or 1% to 25979.60, while the CNX Nifty dropped 82.20 points or 1.02% to 7,979.10.