Markets to make a somber start on sluggish global cues

The Indian markets picked up pace in the second half of the last session to post decent gains and the benchmarks reclaimed their crucial levels despite some weak macro data. Today, the start is likely to be a bit somber on sluggish global cues. Fresh North Korean tension has gripped the markets across the world. There will be buzz in the markets with the government saying that names of over 2.09 lakh firms have been struck off from register of companies for failing to comply with regulatory requirements and action has been initiated to restrict operations of their bank accounts. The Centre has also stepped up action against such entities by bringing in restrictions on the operation of their bank accounts by their existing directors and authorised representatives. There will be some buzz in the garment and textile sector, as the garment exporters have asked the Centre for clarity on the refund process for Integrated Goods and Services Tax (IGST) paid on import of machinery as they were not in a position to use input tax credit. Banking stocks too will be in action as  former RBI Governor Raghuram Rajan has said that the biggest challenge is cleaning up the balance sheets of public sector banks.

The US markets coming after a long weakened suffered sharp selloff in the last session with tech heavy Nasdaq suffering its biggest one day fall in last three months. The decline was in reaction to geopolitical concerns following news North Korea conducted a major nuclear test on Sunday. The Asian markets have made mostly a soft start tailing the weakness in the US markets overnight with persisting North Korean worries. Traders girded for a potential intercontinental ballistic missile launch by Pyongyang, which will celebrate its “foundation day” Saturday. 

Back home, Indian equity benchmarks ended the volatile day of trade with a gain of around half a percent, with frontline gauges recapturing their crucial 31,800 (Sensex) and 9,950 (Nifty) levels, as traders went for bargain hunting after yesterday’s drubbing. Markets made an optimistic start with traders taking encouragement with Prime Minister Narendra Modi’s statement at BRICS Summit 2017 that India is fast changing into one of the most open economies in the world, with improvements on global indices and the biggest ever reform GST weaving the nation into one unified market. Investors also took note that the all powerful GST Council may consider lowering tax on items of common consumption if the high trajectory of collections continues over the next few months. The tax reduction could be either on items of common consumption or a cut in headline rate which will benefit consumers. However, markets pared all of their initial gains and entered into red terrain in noon deals with market participants turning cautious with the domestic rating agency Crisil lowering its growth forecast to 7 percent for fiscal 2018, down from 7.4 percent earlier, as it sees disruptions arising from the implementation of the new uniform tax regime to continue to impact the economy for a few more quarters. Sentiment was also hampered after activity in India’s dominant services sector contracted for a second straight month in August on disruptions caused by GST hurt new orders.  August’s Nikkei/IHS Markit Services Purchasing Managers’ Index rose to 47.5, from July’s 45.9 but still below the 50 mark that separates expansion from contraction. Finally, the BSE Sensex surged 107.30 points or 0.34% to 31,809.55, while the CNX Nifty was up by 39.35 points or 0.40% to 9,952.20.