Markets to make a positive start on supportive global cues

The Indian markets despite a slow start managed a positive close in last session as the banking stocks recovered their losses and traders digested the slow growth report of Core sector. Today, the start is likely to be in green tailing the positive global cues. Though, there will be some cautiousness too, as the prospects of a rollout of the Goods & Services Tax regime from April 1, 2017 appeared to recede further after representatives of States expressed concern about the timeline at a meeting of the GST Council.  They demanded taxation rights for sales in high seas and also increasing the number of items on which cess is to be levied to compensate the states to deal with revenue loss estimated at Rs 90,000 crore post demonetisation. Meanwhile, the Commerce and Industry Ministry has pressed the GST Council to keep exports out of the GST framework and levy lower taxes on labour-intensive sectors like leather, cement and plantation. There will be some buzz in the market with the Cabinet Committee on Parliamentary Affairs on Tuesday recommending holding of the Budget Session from January 31 when the government is likely to table the Economy Survey followed by the Union Budget on February 1. The PSU oil marketing companies will see some action on report that state-owned companies plan to introduce dynamic pricing to their entire retail network in 2017 and beyond. Some sectoral buzz can be seen in leather and capital goods as the Commerce and Industry Ministry has sought exemption from the Goods and Services Tax (GST) for the leather and plantation sectors as well as for exporters importing capital goods under special incentive schemes.

The US markets made a modestly positive start of the new year, though the major indices pulled off the day’s high but managed decent gains on heels of some upbeat economic data, including a report from the Institute for Supply Management showing that growth in US manufacturing activity accelerated by more than anticipated in December. The Asian markets have made mostly a positive start led by the Japanese market after yen weakened against dollar on confidence in the US economy.

Back home, Tuesday’s trading session was clearly of consolidation as the Indian frontline equity indices appeared a bit fatigued and remained in tight range for most part of the day. Investors got some comfort after Finance Minister Arun Jaitley expressed hope that Goods and Services Tax (GST) will be implemented in 2017 and a digitised economy will be future of India. He also said that the last year was a very successful year for India as the country continued to remain the fastest economy in the world. He further added that Indian economy will continue to be one of the fastest growing economies in 2017 as well. Some support also came with the report that Core sector output rose 4.9% in November on the back of a strong expansion in steel production and electricity generation, though the pace is down from 6.6% in October 2016, due to decline in production of crude oil and natural gas. However, the upside remained capped with report that global private equity players pulled out a record $10.3 billion of their investments in 2016 from domestic markets. While demonetisation still dominates most of the headlines, rising crude prices could prove to be the next policy headache. India, which depends on imports to meet 80 per cent of its oil needs, will have to spend Rs 9,126 crore ($1.36 billion) more every year for one dollar per barrel increase in crude oil. Oil prices rose in the first trading day of 2017, buoyed by hopes that a deal between OPEC and non-OPEC members to cut production, which kicked in on Sunday, will be effective in draining a global supply glut. International Brent crude oil prices rose to $56.98 a barrel on Tuesday - close to last year's high of $57.89 per barrel, hit on December 12, 2016. Meanwhile, select IT companies like Infosys and Wipro were trading under pressure after Wipro Chairman Azim Premji and Infosys CEO Vishal Sikka have sent out letters to their respective employees cautioning them about serious dangers facing the world and the IT industry. Globalised industries like IT services are at risk due to the recent political and social developments pose huge risks. On the other hand, sugar stocks gained traction on report from domestic rating agency ICRA that Sugar prices are expected to remain firm in the near term due to tight stock position following 9% decline in production and steady growth in consumption. Shares of logistics companies edged higher ahead of the GST Council meet. Finally, the BSE Sensex gained 47.79 points or 0.18% to 26643.24, while the CNX Nifty added 12.75 points or 0.16% to 8,192.25.