Markets to see some recovery with a flat-to-positive start

The Indian markets extended their decline in last session led by sharp fall in commodity prices and some disappointing earnings, also weighed down by widening trade deficit to an almost three-year high. Today, the start is likely to be slightly in green tailing the positive regional cues and hopes for further rationalization of Goods and Services Tax (GST), as Chief economic adviser (CEA) Arvind Subramanian has hinted at further rationalisation of the five-tier goods and services tax (GST) structure and said the GST Council’s decision last week to prune substantially the list of items under the highest rate bracket won’t affect the Centre’s fiscal position much. Also, Finance Minister Arun Jaitley has said that with greater digitisation and formalisation of financial activities and businesses, India is set to become an “extremely attractive” country to do business. He, however, acknowledged short-term challenges for the country in implementing strategic initiatives such as demonetisation and the GST. There will be some buzz in the export oriented stocks, as the GSTN utility for exporters to claim refunds has been activated. With the new utility RFD-1A, a merchant exporter can claim refund of GST paid at the time of buying goods which he has exported in the relevant month. The auto stocks too will remain buzzing with Centre’s announcement of the introduction of BS-VI grade automobile fuel in the national capital Delhi being advanced by two years to April 2018.

The US markets continuing their bearish trend ended sharply lower in the last session, the weakness was on the heels of the decline seen by stocks overseas amid concerns about the global economy. Uncertainty about Republican lawmakers' ability to come together and pass tax reform legislation also weighed. The Asian markets are showing some recovery and many of them have got a decent positive opening after a four-day drop.

Back home, Extending losing streak for third straight day, Indian equity benchmarks ended the dismal day of trade with a cut of over half a percent on Wednesday. Sentiments remained downbeat since morning as markets after a negative start never looked confidant and extended their southward journey to end below their crucial 32,800 (Sensex) and 10,150 (Nifty) levels. Traders remained concerned with trade deficit widening to its highest in nearly three years in October, as export growth contracted for the first time after more than a year. The trade deficit widened to $14.02 billion last month from $8.98 billion in September. Merchandise exports for October fell 1.12 percent from a year earlier to $23.1 billion, dropping for the first time since August 2016. Market participants paid no heed on Central Board of Direct Taxes’ statement that it was not only confident that the Income Tax (IT) department would achieve Rs 9.80 lakh crore target of direct tax revenue collections for the financial year 2017-18, but that it would surpass it. Traders failed to get any sense of relief with private report stating that the decision to lower goods and services tax (GST) rates on over 200 items could help pull down retail inflation by 20 basis points from the current levels driven by lower food and beverage prices. Investors also failed to get any solace with report that private equity (PE) investors announced transactions of $16.40 billion for January- October, a 55% jump over the year-ago period, driven by big-ticket deals. For October alone, the deal value read $1.6 billion. Besides, Finance Minister Arun Jaitley’s statement that India is set to become an ‘extremely attractive’ country to do business, with greater digitisation and formalisation of financial activities and businesses, failed to provide any respite to the equity markets. Finally, the BSE Sensex declined 181.43 points or 0.55% to 32,760.44, while the CNX Nifty was down by 68.55 points or 0.67% to 10,118.05.