Markets to make a cautious start ahead of Economic Survey

The Indian markets after a choppy trade ended modestly in red in last session. Today, the start is likely to remain cautious amid weak global cues and all eyes will be on the release of Economic Survey 2017-18, which is likely to provide insight into the impact of the recent demonetisation move, likely GDP growth target and possibility of cash transaction tax. The survey authored by Chief Economic Adviser Arvind Subramanian may also talk about fiscal deficit targets, cash transaction tax on withdrawals and universal income tax.  There will be some concern in the market with the CII - IBA Financial Conditions Index for Q4 (January-March) FY2016-17 recording a drop below the 50 mark owing to expectation of banks and financial institutions of deterioration in the overall financial conditions in the economy. The IT stocks may come under pressure on reports that the Trump administration has drafted an executive order aimed at overhauling the work-visa programs, including the H1B and L1 visas. There will be lots of important earnings announcements to keep the markets buzzing.

The US markets ended mostly lower in last session, with major averages giving up some gains on profit taking, also the Commerce Department released a report showing that personal income increased by slightly less than expected in the month of December. The Asian markets have made mostly a lower start following the negative lead overnight from Wall Street as worries about the economic impact of US President Donald Trump's immigration policies continued to weigh on markets. The Japanese market has taken the lead among decliners ahead of the Bank of Japan policy decision.

Back home, Indian equity markets commenced the week on a sluggish note as frontline indices showcased an unenthusiastic performance on Monday and finished the session on a dull note, marginally below the neutral line, as investors at large remained reluctant to build on long positions ahead of government's Budget session, which will start tomorrow with the Economic Survey of India and Annual Budget presentation for financial year 2017-18 by the Finance Minister Arun Jaitley on Wednesday. Sentiments remained subdued with Former Finance Minister P Chidambaram’s statement that cash crunch in the wake of demonetisation is still continuing in many places in the country even though it has eased to an extent in the metros. Broader sentiment was also hit by fears about the impact of US President Donald Trump's immigration curbs. Trump on Friday signed an executive order that suspends the arrival of refugees for at least 120 days and bars visas for travelers from seven Muslim majority countries including Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen for the next three months. The downside risk for the frontline indices was limited by Union Finance Minister Arun Jaitley’s statement that the implementation of the Goods and Services Tax (GST), along with demonetisation will bring more revenues as far as states and the central government is concerned and enlarges the size as far as the formal economy is concerned. Giving some comfort to investors , the Central Board of Direct Taxes in clarifications on GAAR, said that the adequate procedural safeguards are in place to ensure that General Anti-Avoidance Rules (GAAR), which seeks to prevent companies from routing transactions through other countries to avoid taxes, are invoked in a uniform, fair and rational manner. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 211.77 crore on January 27, 2017. Finally, the BSE Sensex declined 32.90 points or 0.12% to 27849.56, while the CNX Nifty was down by 8.50 points or 0.1% to 8,632.75.