Markets to extend gains on supportive global cues

The Indian markets went for a rally in last session reacting to the surprisingly good GDP numbers for the third quarter. Today, the start is likely to remain in green on supportive global cues. Traders will be getting some support with a hedge fund investor survey that investors are likely to remain focused on exposure to emerging markets in 2017, particularly on Asia-Pacific and India. Meanwhile, Finance Minister Arun Jaitley has said that the Q3 GDP data was substantially impacted by demonetization, adding that Indian economic growth is likely to pick up further in coming quarters and that GDP number belies exaggerated claim by many that rural sector was in distress. In other positive cues for the market, Moody's Investors Service has said that demonetisation will be credit positive for India as it is likely to reduce tax avoidance and corruption. The agency however projected growth to slow to 6.4 percent in the January-March quarter, from 7 percent in the previous three months. The PSU oil marketing companies will be in action, as the price of non-subsidised LPG was raised by Rs 86 per cylinder, the steepest such hike ever in India, in line with the rise in global LPG product prices. The cost of aviation turbine fuel, too, has been raised by Rs 214 per kilolitre to Rs 54,293.38 per kilolitre.

The US markets rallied in last session with all the major averages climbing to new record closing highs, in a positive reaction to President Donald Trump's address to a joint session of Congress. Traders were also reacting to indications of a jump in the chance of an interest rate hike by the Federal Reserve later this month. The Asian markets have made a positive start tailing the overnight cues from the Wall Street. Japan’s Topix jumped 1.1 percent, to the highest since Dec. 18, 2015 as the yen weakened against the dollar.

Back home, snapping two days losing streak, Indian equity benchmarks staged an enthusiastic performance on Wednesday, by rallying over half a percent and breaking the important psychological levels in their northward journey as a much stronger-than-expected quarterly economic growth lifted sentiments. India’s Gross domestic product (GDP) for the third quarter (Q3) of financial year 2016-17 (FY17) grew at 7%, allaying fears of any major effect of demonetisation though it was the lowest expansion in four quarters. The Q3 numbers not only made India the fastest-growing large economy in the world but also helped the Central Statistics Office (CSO) retain its earlier projection (in first advance estimates) for full-year GDP growth at 7.1% in the second advance estimates released on Tuesday. The market sentiments were also underpinned by a private survey indicating that Indian manufacturing sector expanded marginally in February as a rebound in export demand contributed to a stronger expansion of total new orders. The Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- an indicator of manufacturing activity -- increased to 50.7 in February, up from 50.4 in January, as output and order books rose at accelerated rates. However, in the early deals there was some cautiousness as CSO has actually forecast a greater slide in gross value added (GVA), suggesting that deceleration is sharper than what the headline GDP growth numbers suggest. The CSO data shows that growth in GVA, which is GDP minus net taxes, will slow down to 6.7% in 2016-17 or 1.1% lower than 7.8% GVA growth in 2015-16. GVA serves as a more realistic proxy to measure changes in the aggregate value of goods and services produced in the economy. The demonetisation effect and the resultant slowdown in household spending and corporate investment may well be hiding in the steeper fall in GVA growth estimates compared to GDP.  Furthermore, the growth of eight core sectors has decelerated to 3.4% in January compared to 5.7% in the same month last year, thanks to plummeting output in three key segments - cement, fertilisers and refinery products.  Meanwhile, information technology (IT) stocks surged after the US President Donald Trump’s first speech to US congress was seen more restrained than the harsh rhetoric seen during his pre-election speeches. The speech did not have any comment on visa issues that may hit domestic IT firms. Instead, the US President said the US immigration should be based on a merit-based system, rather than relying on lower-skilled immigrants. Finally, the BSE Sensex surged 241.17 points or 0.84% to 28984.49, while the CNX Nifty was up by 66.20 points or 0.75% to 8,945.80.