Markets to make a soft start ahead of key data and GST meeting outcome

The Indian markets after a volatile day of trade managed modestly higher close in the last session and snapped their two days declining trend. Today, the mood once again is looking somber on weak global cues and traders will be cautious ahead of the key macro data of industrial production and the GST Council meeting outcome later in the day. Though, it is expected that the GST Council would rationalize tax rates for 100-150 items in the 28 percent tax slab along with taking a call on recommendations of the ministerial panel's suggestions to make the composition scheme attractive, but traders will look for the final outcome. Bihar Deputy Chief Minister Sushil Kumar Modi, who heads the panel on the Goods and Services Tax Network (GSTN), has indicated that the rates on over 200 daily-use items are expected to come down from 28 per cent to 18 per cent. There will be buzz in the realty sector, as the government in its bid to give a fillip to the housing sector and push construction activities has announced that central government employees can get loans up to Rs 25 lakh from the government under the house building advance (HBA) scheme, which is more than three times of the earlier norm. There will be lots of important earnings announcements too, to keep the markets in action.

The US markets despite coming off the worst levels of the day ended lower in the last session, reacting to reports regarding the Senate version of tax reform legislation, which has several key differences with the House version, including a delay in the implementation of the cut in the corporate tax rate. Also, there was report of bigger than expected increase in initial jobless claims for the week. The Asian markets have made mostly a lower start tailing the US markets and led by the Japanese broader index, which is down by over a percent after the yen strengthened against the dollar. Investors in the region appeared to be growing pessimistic about the prospects for meaningful US fiscal reform.

Back home, Indian equity benchmarks ended the volatile day of trade with marginal gains on Thursday. Sentiments remained up-beat in the beginning of the trade with traders eyeing on Goods and Services Tax (GST) Council meeting starting in Guwahati today. GST Council is likely to slash the indirect tax rates on as many as 165 items at its meeting in Guwahati, which begins later today. At present, these 165 items attract 28% tax, which could be moved to the 18% category. The street took note that a year after demonetization, India is getting ready to give digital payments yet another push. It could consider providing incentives in the GST regime for payments that are settled electronically. Investors took note that in a move that could unlock defence contracts of more than Rs 25,000 crore, the government is amending its defence procurement manual (DPM), which will enable the armed forces to procure the latest tech in a speedy manner. Markets pared all of their early gains to enter into red terrain in noon deals, as traders turned cautious with Grant Thornton’s latest International Business Report (IBR) highlighting that India slipped to the 7th position in the September quarter from the 2nd spot in the previous three months in its ‘business optimism index’, showing clear signs of lag in the economy. Investors also took note of the finance ministry’s statement that raising the individual limit of foreign investment up to 15% in power exchanges would be unwise unless a clear business case is established and a strong and adequate regulatory mechanism exists. However, short covering in last leg of trade helped markets to end tad above their neutral lines. Finally, the BSE Sensex gained 32.12 points or 0.10% to 33,250.93, while the CNX Nifty was up by 5.80 points or 0.06% to 10,308.95.