Soft start on cards on weak GDP numbers

The Indian equity market extended gains for a second straight session supported by short covering on derivatives expiry. Today, the start is likely to be a bit soft-to-cautious with India's s Gross Domestic Product (GDP) growth for the first quarter of the fiscal coming in at a dismal 5.70 per cent against 7.90 per cent in the same quarter last year and a 13 quarter lowest level. According to data released by the government, quarterly GVA at basic prices for Q1FY18 from manufacturing sector grew by 1.2 per cent as compared to the growth of 10.7 per cent in Q1FY17. Moreover, industrial growth came in at around 1.60 per cent in Q1FY18 against 7.40 per cent in Q1FY17. In a double whammy, the growth of eight core sectors also slowed down to 2.4 per cent in July. The contraction was mainly seen in output of crude oil, refinery products, fertiliser and cement. However, traders may get some support with Finance Minster Arun Jaitley attributing the lower GDP numbers to pre-GST destocking of goods and expressed hope that the economy will grow at 7 percent, saying manufacturing has bottomed out. There will be buzz in the telecom sector stocks, as a government panel has refused to ease spectrum cap rules, which believes extending the fee-payment tenure for auctioned airwaves and lowering interest rates payable on dues will be enough to help restore the heavily indebted industry's financial health. The inter-ministerial group (IMG) on the telecommunications industry has also rejected other big-ticket demands such as lowering the annual licence fee and spectrum usage charges (SUC). There will be some action in PSU oil marketing companies too, as the domestic cooking gas prices in the country were hiked by 14 per cent from midnight.

The US markets moved further high in the last session with the tech-heavy Nasdaq reaching a new record closing high, following the release of a slew of U.S. economic data, including a Commerce Department report showing a bigger than expected increase in personal income. The Asian markets have mostly made a positive start, though there is sense of cautiousness ahead of the US jobs data to take clues on the Federal Reserve’s policy-tightening path.

Back home, Bulls which woke up in last leg of trade mainly helped benchmarks to end near intraday highs on the F&O series expiry day, recapturing their crucial 31,700 (Sensex) and 9,900 (Nifty) levels. Though, markets made a cautious start and extended their fall, as traders remained on sidelines ahead of Gross Domestic Product (GDP) figures to be announced later in the day. Investors also remained concerned 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. However, markets took U-turn and showed strength to enter into green terrain in afternoon deals with traders taking some encouragement with Finance Minister Arun Jaitley’s statement that the 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. Markets extended gains in last leg of trade to end near high point of the day, as some support came with Moody’s Investors Service’s statement that in the near term, the economy will continue to recover from the temporary liquidity shock from demonetization, while adjusting to the new GST. Moody’s further said that though the indicators like net new nonperforming loan (NPL) formation and problem loan ratios suggest a bottoming of the credit cycle, deteriorating asset quality in agriculture, and micro, small- and medium-sized enterprise (MSME) portfolios pose risks. Finally, the BSE Sensex gained 84.03 points or 0.27% to 31,730.49, while the CNX Nifty was up by 33.50 points or 0.34% to 9,917.90.