Markets to get a modestly green but cautious start

The Indian markets despite losing some momentum in the mid of the trade managed a positive close in last session. Today, the penultimate session of the F&O series expiry is likely to be in green but cautiousness may prevail lacking any major supportive cues. There will be some concern with US President Donald Trump formally withdrewing from the Trans-Pacific Partnership trade deal, distancing the US from its Asian allies as China’s influence rises in the region. On the domestic front, there is buzz that the government is likely to set fiscal deficit target in the range of 3.3-3.4 percent of GDP for the financial year 2017-18 in the upcoming Budget or will target a fiscal deficit of 3.5 per cent of GDP -- same as that of 2016-17. Meanwhile, the Supreme Court paved the way for presentation of the Union Budget on February 1 as it dismissed a plea seeking its postponement in view of Assembly elections in five states. There will be some support to the markets from SBI’s research report Ecowrap, which has said that the Government is likely to make sweeping recast of direct taxes in the ensuing Budget to give a boost to the economy following demonetization. The realty stocks may come under pressure on a report from global rating agency Fitch that residential property sales in India are expected to witness at least 20-30 percent dip in 2017 due to demonetisation impact. There will be lots of important earnings announcements to keep the markets buzzing.

The US markets made a modestly lower closing in last session, amid renewed concerns about protectionist policies under new President Donald Trump. The Asian markets have once again made a mixed start with some of the indices trading marginally in red after President Donald Trump targeted reworking America’s trade relationships.

Back home, in a volatile trading session, Indian benchmark indices managed a green close on Monday as investors' sentiments remained buoyed by rupee appreciation, coupled with hopes of positive incentives in the upcoming Union Budget and broadly positive Asian indices. Some support also came with the BRICS nation’s National Development Bank chief K V Kamath’s statement that India will continue to grow on the back of its consumption-driven economy. He also said that the demonetisation move in India would have only a short-term blip after which India should be back on a clear growth path. Furthermore, in a written response to the Parliament's Public Accounts Committee (PAC), the Revenue Department said that due to the withdrawal of old high-value notes, the idle or hidden cash has come into the formal system which will be utilised for productive purposes. Regarding other implications, it said that increasing use of non-cash modes of transactions will promote transparency and have a lasting positive impact on tax collections, both direct and indirect.  However, the upside remained capped by the report that foreign investors have pulled out over Rs 5,100 crore from the Indian capital market so far this month over concerns regarding 'lower prospects' of economic growth as compared to other emerging markets. The latest FPI outflow followed withdrawal of close to Rs 77,000 crore on net basis from equity and debts together in last three months (October-December). Meanwhile, describing the official data on the index of industrial production (IIP) for November 2016, during which demonetisation was announced, as a ‘false positive’, Crisil Research has said that the latest IIP figures do not reflect the true condition of the Indian manufacturing sector. Belying popular expectations, India's factory output, as measured by the IIP released earlier this month, has rose 5.7% in November, the first month of the government's demonetisation drive. On the global front,  Asian markets ended mostly higher on Monday, though the Japanese shares declined as exporters fell on a stronger yen and after Donald Trump took office as the US president and promised ‘American first’ policies, adding to concerns about the threat of protectionism. Back home, finally, the BSE Sensex gained 82.84 points or 0.31% to 27117.34, while the CNX Nifty was up by 42.15 points or 0.50% to 8,391.50.