Markets to extend the positive mood with a green start

The Indian markets went for an unexpected rally and the major benchmarks not only gathered gains of over one and half a percent but reclaimed their crucial psychological levels. Today, the start of the penultimate session of the F&O series expiry is likely to be in green and more short covering can be seen ahead of the series expiry. Traders will also be pondering on Prime Minister’s meeting with economists and experts, to take stock of the economy and get feedback on ways to deal with the problem of cash crunch post demonetisation. Reportedly 4-5 sectoral groups have been set up to discuss new initiatives and Budget proposals. The mandate is to come up with concrete suggestions to neutralise the adverse impact of demonetisation, push growth with a special focus on employment generation and promote farm productivity. There will be some cautiousness too in the markets on reports that foreign portfolio investors (FPIs) have pulled out close to $10 billion, or almost Rs 68,000 crore, from the country's debt and equity markets since November 8, in one of the largest selloffs in a two-month period since 2013. There will be some buzz in the aluminium stocks, as India has terminated its investigation on imposition of safeguard or penal duties on imports of aluminium products, on the ground that alleged serious injury or threat of such injury to domestic industry during the period of investigation could not be established.

The US markets despite coming off the day’s high managed a positive close in last session and the tech-heavy Nasdaq surged to a new record closing high, after the Conference Board reported a continued improvement in consumer confidence in the month of December. The Asian markets have made a mixed start though the Japanese market was marginally in green in a thin volume trade.

Back home, a session after displaying a stressful performance, Indian equity indices pulled through a sparkling performance by confidently rallying over one and half percent on Tuesday, thanks to the hefty buying in some blue-chip counters, which were heavily over-sold in last few trading sessions and covering-up of pending short positions by speculators ahead of the December futures and options expiry on Thursday. The relentless across the board value picking ensured that the frontline indices settle over the psychological 8,000 (Nifty) and 26,200 (Sensex) levels. Local bourses remained firm despite report that the yearly State Bank of India (SBI) Composite Index, an indicator for tracking India’s manufacturing activity, has crashed to an all-time low in December 2016 of 45.5 (moderate decline), compared to last month’s revised index of 50 (low growth). The report said factory output, measured by the index of industrial production, may continue to remain in negative territory in December 2016. The sharp up-move was mostly seen as a technical bounce following the brutal mayhem that had pulled stocks in oversold territory. Sentiments got support with FM Arun Jaitley’s hint of a lower tax regime; he said that India has been guided by the principle that a lower level of taxation is the key to building a globally competitive economy in the past two and a half decades since liberalization. Some support also came with Union Minister Nitin Gadkari’s statement that demonetisation will help to increase government revenue and enable it to allocate more funds to welfare scheme for the people. He further said that India is moving towards a less cash economy like many other countries of the world. Therefore, if something big has to be achieved, then one has to face some difficulties in the beginning. On the global front, Asian markets ended mostly higher on Tuesday amid low-volume trading in the absence of fresh cues. Back home, finally, the BSE Sensex gained 406.34 points or 1.57% to 26213.44, while the CNX Nifty rose 124.60 points or 1.58% to 8,032.85.