Markets to get a mildly positive start reacting to GDP numbers

The Indian markets extended their weakness in last session and ended with another quarter percent of loss, with sentiments turning cautious ahead of the Q3 and updated full year GDP numbers. Today, the start is likely to be in green and the traders will be reacting positively to the unexpectedly better GDP growth for the third quarter. As per the Central Statistical Office (CSO), Q3 GDP growth is pegged at 7 percent, marginally lower than the Q1 growth of 7.2 percent and Q2 growth of 7.4 percent. It’s now forecast to achieve 7.1 per cent growth in the year to March. However, there will be some cautiousness too with India's fiscal deficit touching Rs 5.64 lakh crore at the end of January, 105.7 percent of the full-year target, mainly due to lower realisation of non-tax revenue. In the Budget presented on February 1, the government had retained the fiscal deficit target at 3.5 per cent of GDP. In another negative development, growth in the core sector industries slipped to a five-month low in January to 3.4% compared with 5.7% in the year-ago period. The slower core sector is likely to dent industrial growth further. The telecom stocks will keep buzzing with report that the government is looking at a fresh round of spectrum auction between July and December and will send a recommendation to the telecom regulator soon.

The US markets closed lower in last session reflecting trepidation ahead of President Donald Trump's highly anticipated speech to a joint session of Congress. With the drop on the day, the Dow and the S&P 500 pulled back off yesterday's record closing highs. The Asian markets have made mostly a positive start, as investors searched for new details of Donald Trump’s economic strategy during his speech to Congress. Chinese market was up after official factory gauge firmed in February as producer prices rebounded.

Back home, Indian benchmark indices once again settled in the red zone on the last trading day of the month as investors stayed cautious ahead of GDP data scheduled to be released later in the day. According to private report, the second official estimate of GDP growth is likely to show the economy expanded below 7% in FY17, tripped by the November 8 demonetisation that dented the consumption demand. Sentiments weakened further with India Ratings and Research’s (Ind-Ra’s) estimates that aggregate fiscal deficit of Indian states will increase marginally to 3.3% of gross domestic product (GDP) in FY18 from its forecast of 3.2% for FY17. It expects states’ debt/GDP ratio may increase marginally to 24.3% in FY’18 from 24% forecasted for FY’17. However, the downside remained capped with Finance Minister Arun Jaitley’s statement that India has potential to grow faster and plans are underway to reduce poverty and create jobs in rural areas. Adding optimism among inventors, Economic Affairs Secretary Shaktikanta Das said Goods and Services Tax (GST) will be implemented from July 1, as all states have agreed on the implementation date. The government plans to get the GST Council's approval on integrated GST (iGST), central GST (cGST) and state GST (sGST) drafts at its March 4-5 meeting before the second half of the budget session of Parliament begins on March 9. Das also said that the positive effects of demonetisation will be visible from April and the completion of remonetisation process will drive consumption going forward. Meanwhile, shares of smallcap companies were in focus with the BSE Smallcap index touched a fresh nine-year high on the BSE in intra-day trade after a sharp rally in select Tata Group companies, logistics, auto ancillary, steel and banking stocks. Tata Teleservices (Maharashtra), TRF, Tata Metaliks and Tata Sponge Iron from Tata Group have surged between 5% and 20% on the BSE. Finally, the BSE Sensex declined 69.56 points or 0.24% to 28743.32, while the CNX Nifty was down by 17.10 points or 0.19% to 8,879.60.