Markets to start new year and month on a mildly positive note

The Indian markets snapped the month and the year on a high note, with benchmarks ending higher by around a percent. Today, the start of the New Year is likely to be in green and market will be getting some support with Prime Minister Narendra Modi’s announcement of a range of schemes targeting the poor, lower middle class, senior citizens and small businessmen. Meanwhile, the Reserve Bank of India (RBI) governor Urjit Patel in his Financial Stability Report published by the RBI has expressed that Goods and Services Tax and the withdrawal of specified bank notes will impart far reaching changes going forward. There will be buzz in the banking stocks, as after the PM’s call to lenders to do more to increase lending for the poor, State Bank of India has slashed interest rates by 0.9 percentage point, or 90 basis points (bps), bringing down the rates to the lowest in about a decade, forcing rivals to follow suit. The realty sector is likely to rejoice with the decision most. In other development, in a bid to strengthen capital base of public sector banks (PSBs), the government has allowed 12 lenders to raise nearly Rs 3,000 crore via preferential shares over and above the Rs 22,915 crore capital support committed to them in July last year. The PSU oil marketing companies will be in action, as petrol price has been hiked by Rs 1.29 per litre and diesel by 97 paise per litre excluding state levies. The auto companies will be in focus too, as they will be announcing their monthly sales numbers, which will show the demonetization impact.

The US markets ended in red on the last session of the year but were well off the day’s low. Profit taking mainly contributed to the continued weakness on Wall Street after the tech-heavy Nasdaq had reached a record closing high. The Asian markets are mostly closed for the day; meanwhile an adviser to the People’s Bank of China has said that China should set a more flexible 2017 economic growth target to give policy makers more room to enact reform.

Back home, Indian benchmark indices showcased courageous performance and went on to outclass indices around the world by vivaciously rallying around a percent in the session and settling above the psychological 8,150 (Nifty) and 26,600 (Sensex) levels. Sentiments remained up-beat with Finance Minister Arun Jaitley’s statement that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth. He had said that there has been a 26.2 per cent increase in central indirect tax collection till November 30, while till December 19, direct tax collection increase has been to the extent of 14.4 per cent against a growth rate of only 8.3 per cent previous year. Adding optimism among investors, Agriculture Minister Radha Mohan Singh said that the growth in agriculture and allied sectors will be higher during this fiscal as the country is likely to harvest bumper crop buoyed by good rains. The Minister also assurance that the Centre will procure pulses and other crops if rates fall below the minimum support price (MSP) level. Furthermore, Union government has charted out a roadmap for the early completion of 99 irrigation projects under the Accelerated Irrigation Benefits Programme (AIBP) and Pradhan Mantri Krishi Sinchayee Yojana (PMKSY). Some support also came with the Reserve Bank of India (RBI) easing norms for working capital lending to micro and small enterprises (MSEs) on difficulties faced by them, as a result of the sudden withdrawal of legal tender status of high-value currency notes. Meanwhile, market participants give littlie importance to RBI’s Financial Stability Report, which indicated a sharp rise in the non-performing assets (NPAs) of banks as “the banking stability indicator shows that the risks to the banking sector remained elevated due to continuous deterioration in asset quality, low profitability and liquidity”. The stress test indicated that under the baseline scenario, the GNPA ratio may increase from 9.1% in September 2016 to 9.8% by March 2017 and further to 10.1% by March 2018. Finally, the BSE Sensex gained 260.31 points or 0.99% to 26626.46, while the CNX Nifty rose 82.20 points or 1.01% to 8,185.80.