Markets to make a flat-to-cautious start of the F&O expiry session

The Indian markets made a smart come back in the last session on easing geopolitical tensions, and the major averages recovered most of their losses of previous session. Today, the start of the F&O series expiry session is likely to be flat-to-cautious, as tensions between the US and North Korea seemed to escalate. Trade may turn choppy in the latter trade as the traders will be rolling over their positions to the next series. There will be some concern with assessment of RBI in its annual report that fiscal consolidation may come under threat at the central and state levels due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix. Traders will be getting some support with Finance Minister Arun Jaitley’s statement that the Goods and Services Tax (GST) is bound to impact the direct tax collection as well due to the increased detection technology and greater compliance. The Finance Minister also said that even before GST was rolled out, the impact of demonetisation has expanded the number of assessees under the personal income tax. The auto stocks will keep buzzing with the Union Cabinet approval of promulgation of an Ordinance that would allow the GST Council to hike the maximum rate of compensation cess on large and luxury vehicles to 25 per cent from the current cap of 15 per cent.

The US markets extended their gains in the last session, some upbeat U.S. economic data, including a report showing a jump in private sector employment supported the markets. Though, the trading activity was somewhat subdued, however, as traders seemed reluctant to make significant moves. The Asian markets have made a mixed start and some indices are down by over half a percent. Japanese market was up despite its industrial production slowing in July from June, as continued strong exports and a cheap yen indicated that the phase is temporary.

Back home, Wednesday turned out to be a fabulous day of trade for the Indian equity benchmarks, with frontline gauges garnering gains of around a percent on account of increased buying in select stocks coupled with covering-up of pending short-positions ahead of August month F&O expiry tomorrow. Market participants accumulated quality stocks at reasonable valuations after yesterday’s drubbing. Sentiments remained optimistic since beginning, with key gauges making a gap-up opening and trading jubilantly through the session after concerns about North Korea’s firing of a missile over Japan ebbed. Traders took some encouragement with Finance Minister Arun Jaitley’s statement that goods and services tax (GST) collections have exceeded estimates in the first month of the landmark levy’s rollout, despite a significant number of assessees not having filed returns yet. Finance Minister said that GST mopup in July pegged at Rs 92,283 crore and could rise further. Some support also came with NITI Aayog’s statement that enhancing access to low-cost capital to businesses could serve as an important vehicle for improving the business environment, especially in poor states like Bihar. Markets extended rally in afternoon deals with Finance Ministry expressing its confidence of meeting the 3.2% fiscal deficit target for the financial year 2017-18, despite the low dividends from the Reserve Bank of India (RBI) and muted proceeds from stake sales in public sector enterprises till now. However, markets trimmed some of their gains in last leg of trade to end off day’s highs, as anxiety spread among the investors with ICRA’s latest report stating that the profitability of India Inc got hurt with the margins contracting by as much as 1.80% to 15.7% on a year-on-year basis on account of introduction of new tax regime. Some concerns also came with a private report that India's economic growth is likely to remain soft and the GDP is expected to grow by 6 per cent in April-June, down from 6.1 per cent in the preceding quarter. Finally, the BSE Sensex soared 258.07 points or 0.82% to 31,646.46, while the CNX Nifty was up by 88.35 points or 0.90% to 9,884.40.