Markets to make a flat start of the F&O series expiry week

The Indian markets extended their gains in last session to close near five-month highs, despite uncertainties over the US fiscal and monetary policies. Today, the start of the F&O series expiry week is likely to be flat-to-cautious. Though, traders will be reacting positively to the news that the GST Council in a meeting during weekend cleared the law for compensating states for loss of revenue that they may incur during implementation of Goods and Service Tax. The council’s nod has paved the way for the law to be tabled in Parliament in the second half of the budget session beginning 9 March. There will be buzz in the telecom sector on reports that Reliance Communications and the Tata Group have initiated talks to explore a possible union that could see Tata Teleservices joining forces with the merged RCom-Aircel and MTS. Meanwhile, Telecom regulator TRAI will review the rules of tariff assessment with regard to promotional offers and predatory pricing, issues that have triggered a public spat between Reliance Jio and incumbent operators. Banking stocks too will keep buzzing with an Arcil official stating that once the Insolvency and Bankruptcy Bill is passed, the sale of bad loans to asset reconstruction companies (ARCs) could improve substantially to 30-35 per cent of the loans put on the block by banks and financial institutions from the current 10-15 per cent.

The US markets ended at fresh record highs despite a choppy session, although traders seemed somewhat reluctant to make significant moves, to get a head start on the long holiday weekend. The Asian markets have made mostly a positive start taking cues from the US markets, though the Japanese index was down for a third straight session after the yen dropped after a three-day gain.

Back home, Indian benchmarks showcased an amazing performance on Friday and went on to outclass indices around the world by surging over half a percent and settling above the psychological 8,800 (Nifty) and 28,450 (Sensex) levels. Thursday’s optimism got spilled over into the today’s session helping the frontline indices in extending the winning momentum for second successive session. Sentiments remained sanguine as Reserve Bank of India (RBI) governor Urjit Patel said India is at a ‘good place’ in terms of financial stability and the central bank will manage any sharp volatility in the markets arising out of global developments including concerns over U.S. President Donald Trump's protectionist policies. He also said RBI is looking beyond the headline inflation figures and is focusing on core inflation trends, which excludes more volatile food and fuel prices, to guide RBI's policy moves. Further, Investors’ morale also remained upbeat as Arjun Ram Meghwal, Minister of State for Finance said that the ongoing digital push and encouragement of cashless transactions would boost the country’s gross domestic product (GDP). He also said that India was on the verge of a transition from a large cash economy to a less cash and digital economy. However, weak global cues coupled with depreciation in rupee value have limited the gains. Indian rupee fell 8 paise to 67.15 against the US currency on Friday on increased dollar demand from importers and banks. Some investors remained nervous with Nomura’s report that the impact of demonetisation is still visible and cash levels in the economy are not expected to be sufficient until March, which may keep trade volumes depressed for the next two months. As per data released by the commerce ministry, growth in exports in January was lower than 5.72% in December. Furthermore, India Ratings and Research (Ind-Ra) does not expect the performance of Indian companies to improve substantially in FY18. Pick-up in capital expenditure by the private sector is at least another two fiscal years away. Rise in commodity prices and uptick in interest rates amid rate hikes globally are two important risks to slow-but-improving demand for FY18. Finally, the BSE Sensex gained 167.48 points or 0.59% to 28468.75, while the CNX Nifty was up by 43.70 points or 0.50% to 8,821.70.