Markets to get a soft-to-cautious start of the new week

The Indian markets ended a choppy session slightly higher in the last session. Today, the start is likely to be a bit cautious and weakness can be seen reacting to the industrial production data announced after market hours on Friday. Industrial output growth fell to 3.8 percent during the month of September from a revised 4.5 percent rise in August. However, the markets will keep buzzing and there will be action in GST related stocks whose rates were tinkered at GST Council's 23rd meeting in Guwahati. The Council decided to reduce the tax rate on 178 of the current 228 items from 28% to 18%, with effect from November 15. All restaurants will be taxed at 5%, except those in hotels with a tariff of ?7,500 or more, which will be taxed at 18% with input tax credit (ITC). The PSU banking stocks will be in action, as Finance Minister Arun Jaitley has said that the government has decided to inject more capital into state-owned banks to strengthen the banking system and spur economic growth. Steel stocks too will be in focus as the export of total finished steel saw an annual jump of 45 per cent to 0.778 million tonnes during October 2017. The overall exports of finished steel stood at 0.537 million tonnes in the same month last year. There will some important result announcements too, to keep the markets buzzing.

The US markets made a mixed closing in the last session, as traders continued to digest the details of the Senate Republican version of tax reform legislation and largely overlooked a report from the University of Michigan showing a bigger than expected pullback in consumer sentiment in the month of November. The Asian markets have made a mixed start and some of the indices are in red as investors seemed seeking fresh catalysts after last week’s run to record highs. Japanese market was down ahead of its October PPI.

Back home, Indian equity benchmarks managed to end the extremely volatile day of trade with modest gains on Friday, with frontline gauges holding their crucial 10,300 (nifty) and 33,300 (Sensex) levels. Markets altered between green and red throughout the session and somehow managed to end in positive zone, as traders took some comfort with Union Minister of State for Water Resources Arjun Ram Meghwal’s statement that the agriculture sector’s contribution to the country’s GDP has increased under the present government’s rule. Some support also came with the global president of the Association of Chartered Certified Accountants (ACCA), Brian McEnery’s statement that India has made significant strides towards ethical standards in business and enforcing provisions around corporate governance. However, up-side remained capped as sentiments remained downbeat with Moody’s Investors Service latest Global Macroeconomic Update (2018-19) stating that India is the only G20 emerging market country where growth has slowed sharply for six consecutive quarters. But it expects economic growth in 2017 to average 6.2% before accelerating to around 7.5% in 2018 and 2019. It said that the slowdown in economy was due to the temporary negative impact of last year's demonetization, temporary disruption related to the rollout of the Goods and Service Tax (GST) and weak bank lending for investment-related activity due to a high proportion of delinquent loans on bank balance sheets. Sentiments also remained dampened as the Congress-ruled states have sought a complete overhaul of the indirect tax regime with the highest slab at 18% instead of 28%. Meanwhile, the GST Council decided to keep only 50 items, mostly demerit, sin and luxury goods in top 28% tax bracket. Lower 18% GST will be levied on chewing gums, chocolates, after shave, deodorant, washing power, detergent, marble. The all-powerful council pruned the list of items attracting the top 28% tax rate to just 50 from 227 previously. Finally, the BSE Sensex gained 63.63 points or 0.19% to 33,314.56, while the CNX Nifty was up by 12.80 points or 0.12% to 10,321.75.