Markets likely to make a flat-to-soft start

05 Jul 2017 Evaluate

The Indian markets after much of dilly-dallying ended flat with a negative bias in the last session. Today, the start is likely to be flat-to-soft tailing the weakness in regional markets on geopolitical worries. North Korea said that it successfully test-launched a first intercontinental ballistic missile, (ICBM), which many experts said could put all of the US state of Alaska within range for the first time. Traders may also be cautious with a Fitch Ratings' report stating that the newly-implemented goods and services tax (GST) will support productivity and boost the long-term growth prospects but is unlikely to increase tax revenue in the short-term. Meanwhile, Revenue Secretary Hasmukh Adhia has said that about two lakh new registrations on GST have been done since it reopened last week. Of these, 39,000 have already been approved. Logistics stocks will see some upmove, as the Union Road Transport and Shipping Minister Nitin Gadkari has said that logistic sector will gain most with GST, as on the back-of-the-envelope calculations logistics costs would come down by at least 20 per cent. Gems and jewellary stocks too will see some action on report that India’s gems and jewellery exports rose over 11 per cent to $6.78 billion during the first two months of the current fiscal, largely driven by demand in major markets like the US.

The US markets remained closed in last session unable to give any cues to the other markets, while the Asian markets have made mostly a soft start on looming geopolitical concern over North Korea’s nuclear weapons program, after US confirmed North Korea’s claim that it had launched an intercontinental ballistic missile. Japanese shares were weighed down by the strengthening yen.

Back home, it turned out to be a dismal performance from the benchmark indices on Tuesday, as they failed to snap the session in the positive territory and settled marginally below the neutral lines. The frontline indices took a breather, a session after showcasing a scintillating performance, as market participants turned cautious after North Korea test-launched an intermediate-range ballistic missile days before leaders from the Group of 20 nations are due to discuss steps to rein in Pyongyang's weapons programmes. On the domestic front, fear of uncertainty over the implementation of the Goods and Services Tax (GST) has cast its shadow on manufacturing activities as growth in the sector fell to a four-month low in June, showed the widely-tracked Nikkei purchasing managers' index (PMI). The PMI dropped to 50.9 in June from 51.6 the previous month, as a softer rise in new orders resulted in weaker growth in production. However, losses in the benchmark indices were capped with the Railway Minister Suresh Prabhu’s statement that the India’s GDP growth to the tune of 8-9% was expected and the new tax rates would contribute significantly towards this. He also said the GST aims at increasing the number of taxpayers and, as the tax revenue rises, the GDP will also increase. Some support also came with the report that the Financial Stability Board (FSB), an international body for global financial system, placed India in the league of countries that are ‘compliant or largely compliant’ on implementation of priority area reforms. Finally, the BSE Sensex declined 11.83 points or 0.04% to 31209.79, while the CNX Nifty was down by 1.70 points or 0.02% to 9,613.30.

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Markets likely to make a flat-to-soft start

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